The market risk premium is 6%, and the risk-free rate is 4%.

1. Which stock has more systematic risk? Use the calculation to support your answer.
2. Which stock has more total risk? Use the calculation to support your answer.

5. [14 Points] Consider the following information on Stocks A and B: State of Economy Rate of Return if State Occurs Probability of State of Economy Stock A Stock B Recession 0.60 5% -10% Boom 0.40 20% 30% The market risk premium is 6%, and the risk-free rate is 4%. 1) Which stock has more systematic risk? Use the calculation to support your answer. 2) Which stock has more total risk? Use the calculation to support your