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Question 2 You are given the following information about Stock 1 and Stock 2. Rate of Return if State Occurs State of Economy Probability of

Question 2 You are given the following information about Stock 1 and Stock 2. Rate of Return if State Occurs State of Economy Probability of State of Economy Stock 1 Stock 2 0.25 -0.4 Recession Normal Boom 0.5 0.11 0.29 0.13 0.10 0.56 0.25 The market risk premium is 8% and the risk-free rate is 4%. (a) Use an appropriate computing tool to help you work out the following. Calculate the expected returns of Stock 1 and Stock 2. (ii) Appraise which stock has the higher systematic risk. (111) Compute the total risk of each stock. Appraise which stock is riskier

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