Consider the following information about stocks I and II

jagguarpaw January 11, 2017 0 Comments

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Question: Consider the following information about Stocks I…

Consider the following information about stocks I and II

Rate of return for stock 1 and 2

State of economy Probability of state of economy Stock 1 Stock 2
Recession .30 .10 -.25
Normal .40 .17 .12
Irrational exuberance .30 .11 .45

The market risk premium is 8 percent, and the risk-free rate is 3 percent. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Enter your return answers as a percent.)

The standard deviation on stock I’S RETURN IS? Percent, and the stock I beta is? The standard deviation on stock ll’s return? Percent, and the stock ll beta is? Therefore, based on the stock’s systematic risk/beta, stock one of two is “riskier”.