Consider the following information about Stocks I and II:
Rate of Return If State Occurs
Sta...
Business, 12.08.2020 05:01 brattymoo1009
Consider the following information about Stocks I and II:
Rate of Return If State Occurs
State of Probability of
Economy State of Economy Stock I Stock II
Recession .30 .05 −.30
Normal .45 .22 .10
Irrational exuberance .25 .05 .50
The market risk premium is 6 percent, and the risk-free rate is 2 percent. (Do not round intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e. g., 32.16. Round your beta answers to 2 decimal places, e. g., 32.16.)
The standard deviation on Stock I's expected return is percent, and the Stock I beta is . The standard deviation on Stock II's expected return is percent, and the Stock II beta is . Therefore, Stock is "riskier".
Answers: 3
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