Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of- State of Economy Economy Stock I Stock II Recession .25 .06 -.30 Normal Irrational exuberance .45 .30 .18 .06 .12 .45 The market risk premium is 8 percent, and the risk-free rate is 6 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 return is deviation on Stock II's return is stock's systematic risk/beta, Stock percent, and the Stock I beta is The star percent, and the Stock II beta is Therefore, based on the is "riskier".
Consider the following information about Stocks I and II: Rate of Return if State Occurs Probability of State of- State of Economy Economy Stock I Stock II Recession .25 .06 -.30 Normal Irrational exuberance .45 .30 .18 .06 .12 .45 The market risk premium is 8 percent, and the risk-free rate is 6 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 return is deviation on Stock II's return is stock's systematic risk/beta, Stock percent, and the Stock I beta is The star percent, and the Stock II beta is Therefore, based on the is "riskier".
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following information about Stocks I and II:
Rate of Return if State
Occurs
Probability of State of
State of Economy
Recession
Economy
Stock I
Stock Il
.25
.06
-.30
Normal
.45
.18
.06
Irrational exuberance
.30
.12
.45
The market risk premium is 8 percent, and the risk-free rate is 6 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 return is
deviation on Stock II's return is
stock's systematic risk/beta, Stock
percent, and the Stock I beta is
percent, and the Stock II beta is
. The standar
Therefore, based on the
is "riskier".
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