Question 11 (10 points) An analyst expects to see only 3 possible economy conditions next year: recession (prob: 20%), normal (prob:65%), and boom(prob: 15%). Stock A will yield 4.5% return in recession, 34.5% return in normal, and 20.5% return in boom, while stock B will yield-25%, 17%, and 45% returns, respectively. The market risk premium is 11.5 percent, and the risk-free rate is 4.5 percent. Which stock has the most systematic risk? Which stock has the most unsystematic risk? 1) Most systematic-B; most unsystematic-A 41 Most systematic-A; most unsystematic-A 3) Most systematic B; most unsystematic-B 4) Most systematic A: most unsystematic-B Prevlous Page Next Page Page 11 of 20 Question 11 (10 points) An analyst expects to see only 3 possible economy conditions next year: recession (prob: 20%), normal (prob:65%), and boom(prob: 15%). Stock A will yield 4.5% return in recession, 34.5% return in normal, and 20.5% return in boom, while stock B will yield-25%, 17%, and 45% returns, respectively. The market risk premium is 11.5 percent, and the risk-free rate is 4.5 percent. Which stock has the most systematic risk? Which stock has the most unsystematic risk? 1) Most systematic-B; most unsystematic-A 41 Most systematic-A; most unsystematic-A 3) Most systematic B; most unsystematic-B 4) Most systematic A: most unsystematic-B Prevlous Page Next Page Page 11 of 20