The return on the market is 11% and the risk free rate is 4% a. Which share has the most systematic risk? Show all your workings.

b. Which share has the most unsystematic risk? Show all your workings.

c. Explain which share would add the most risk to a portfolio. Explain your answer.

You have the following information on two shares, A and B: State of economyProbability of state Rate of return if Recession Normal Expansion 0.2 0.55 0.25 state occurs Share A 0.02 0.32 0.18 Share B -0.2 0.12 0.40