Consider the following information about Stocks I and II:
State of EconomyProbability of State of EconomyRate of Return if State OccursStock IStock IIRecession.30.04−.19Normal.50.16.06Irrational exuberance.20.05.39
The market risk premium is 8 percent, and the risk-free rate is 5 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.)
Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of- Economy .30 .50 .20 Rate of Return if State Occurs The standard deviation on Stock I's return is deviation on Stock Il's return is stock's systematic risk/beta, Stock Stock I .04 16 .05 Stock II -.19 .06 .39 The market risk premium is 8 percent, and the risk-free rate is 5 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.) X Answer is not complete. percent, and the Stock I beta is percent, and the Stock II beta is is "riskier". The standard Therefore, based on the