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Consider the following information on Stocks I and II: Probability of Rate of Return if State Occurs State of Economy State of Economy Stock I Stock II Recession .24 .030 -.34 Normal Irrational exuberance .59 .17 .340 .26 .200 .44 The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation % % c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock

Consider the following information on Stocks I and II: Probability of Rate of Return if State Occurs State of Economy State of Economy Stock I Stock II Recession .24 .030 -.34 Normal Irrational exuberance .59 .17 .340 .26 .200 .44 The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation % % c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock

Essentials Of Investments
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
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Consider the following information on Stocks I and II: Probability of Rate of Return if State Occurs State of Economy State of Economy Stock I Stock II Recession Normal .24 .59 .030 -.34 .340 .26 Irrational .17 .200 .44 exuberance The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation % % c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock
Transcribed Image Text:Consider the following information on Stocks I and II: Probability of Rate of Return if State Occurs State of Economy State of Economy Stock I Stock II Recession Normal .24 .59 .030 -.34 .340 .26 Irrational .17 .200 .44 exuberance The market risk premium is 11.4 percent, and the risk-free rate is 4.4 percent. a. Calculate the beta and standard deviation of Stock I. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. b. Calculate the beta and standard deviation of Stock II. Note: Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16. c. Which stock has the most systematic risk? d. Which one has the most unsystematic risk? e. Which stock is "riskier"? a. Beta Standard deviation b. Beta Standard deviation % % c. Most systematic risk d. Most unsystematic risk e. "Riskier" stock
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