Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .26 .56 .18 The standard deviation on Stock I's return is deviation on Stock Il's return is stock's systematic risk/beta, Stock I Rate of Return if State Occurs The market risk premium is 5 percent, and the risk-free rate is 3 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.) II Stock I .03 .20 .09 Stock II -.34 .14 .54 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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Consider the following information about Stocks I and II:
State of Economy
Recession
Normal
Irrational exuberance
Probability of State of
Economy
.26
.56
.18
The standard deviation on Stock I's return is
deviation on Stock Il's return is
stock's systematic risk/beta, Stock
I
Rate of Return if State
Occurs
The market risk premium is 5 percent, and the risk-free rate is 3 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.)
II
Stock I
.03
.20
.09
Stock II
-.34
.14
.54
percent, and the Stock I beta is
percent, and the Stock II beta is
▼is "riskier".
The standard
Therefore, based on the
Transcribed Image Text:Consider the following information about Stocks I and II: State of Economy Recession Normal Irrational exuberance Probability of State of Economy .26 .56 .18 The standard deviation on Stock I's return is deviation on Stock Il's return is stock's systematic risk/beta, Stock I Rate of Return if State Occurs The market risk premium is 5 percent, and the risk-free rate is 3 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.) II Stock I .03 .20 .09 Stock II -.34 .14 .54 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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