Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .30 .45 .25 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 .09 .16 .10 Stock II -.24 .11 .44 The market risk premium is 8 percent, and the risk-free rate is 4 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.) percent, and the Stock I beta is percent, and the Stock II beta is is "riskier". The standard Therefore, based on the
Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .30 .45 .25 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 .09 .16 .10 Stock II -.24 .11 .44 The market risk premium is 8 percent, and the risk-free rate is 4 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.) percent, and the Stock I beta is percent, and the Stock II beta is is "riskier". The standard Therefore, based on the
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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![Consider the following information about Stocks I and II:
State of Economy
Recession
Normal
Irrational exuberance
Probability of State of
Economy
.30
.45
.25
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
.09
.16
.10
Stock II
-.24
.11
.44
The market risk premium is 8 percent, and the risk-free rate is 4 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.)
percent, and the Stock I beta is
percent, and the Stock II beta is
is "riskier".
The standard
Therefore, based on the](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5c708bf4-2749-4dab-8902-2a6d04988193%2F499209d3-529e-4706-8bb5-8d7bae3c8344%2F75fhw6_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following information about Stocks I and II:
State of Economy
Recession
Normal
Irrational exuberance
Probability of State of
Economy
.30
.45
.25
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
.09
.16
.10
Stock II
-.24
.11
.44
The market risk premium is 8 percent, and the risk-free rate is 4 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.)
percent, and the Stock I beta is
percent, and the Stock II beta is
is "riskier".
The standard
Therefore, based on the
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