Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Stock I Stock II Recession .21 .015 -.31 Normal Irrational exuberance .56 .325 .23 .23 185 .41 The market risk premium is 11.1 percent, and the risk-free rate is 4.1 percent. a. Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.) b. Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.) c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"?

Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Stock I Stock II Recession .21 .015 -.31 Normal Irrational exuberance .56 .325 .23 .23 185 .41 The market risk premium is 11.1 percent, and the risk-free rate is 4.1 percent. a. Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.) b. Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.) c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 6P: The market and Stock J have the following probability distributions: a. Calculate the expected rates...

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