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Question 3 Consider the following information on Stocks I and II: Rate of Return If State Occurs State of Economy Recession Normal Irrational exuberance Probability

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Question 3 Consider the following information on Stocks I and II: Rate of Return If State Occurs State of Economy Recession Normal Irrational exuberance Probability of State of Economy .35 .30 .35 Stock ! .03 .39 33 Stock Il 23 .14 49 The market risk premium is 10 percent, and the risk-free rate is 4.5 percent. a. What is the beta of each stock? b. What is the standard deviation of each stock? c. Which stock has the most systematic risk? d. Which stock has the most unsystematic risk? e. Which stock is riskier

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