Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Recession Normal 8.30 8.38 Irrational exuberance 8.48 Stock I 8.03 8.37 8.31 Stock II -8.38 8.14 2.47 The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock I Stock Beta a-2. Which stock has the most systematic risk? ○ Stock I ○ Stock Il b-1. What is the standard deviation of each stock? Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation Stock Stock I b-2. Which one has the most unsystematic risk? ○ Stock I O Stock Il c. Which stock is "riskier"? ○ Stock I ○ Stock Il
Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Recession Normal 8.30 8.38 Irrational exuberance 8.48 Stock I 8.03 8.37 8.31 Stock II -8.38 8.14 2.47 The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock I Stock Beta a-2. Which stock has the most systematic risk? ○ Stock I ○ Stock Il b-1. What is the standard deviation of each stock? Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation Stock Stock I b-2. Which one has the most unsystematic risk? ○ Stock I O Stock Il c. Which stock is "riskier"? ○ Stock I ○ Stock Il
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 12MC
Related questions
Question
None
![Consider the following information on Stocks I and II:
Rate of Return if State Occurs
Probability of State of
State of Economy
Economy
Recession
Normal
8.30
8.38
Irrational
exuberance
8.48
Stock I
8.03
8.37
8.31
Stock II
-8.38
8.14
2.47
The market risk premium is 8 percent and the risk-free rate is 40.5 percent.
a-1. What is the beta of each stock?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Stock I
Stock
Beta
a-2. Which stock has the most systematic risk?
○ Stock I
○ Stock Il
b-1. What is the standard deviation of each stock?
Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Standard Deviation
Stock
Stock I
b-2. Which one has the most unsystematic risk?
○ Stock I
O Stock Il
c. Which stock is "riskier"?
○ Stock I
○ Stock Il](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F8ed9a082-f655-4cb3-887d-aa7ab7b13595%2F3ee75dd2-bc66-46d7-a9d5-cc2047090c5f%2Fihraef9_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following information on Stocks I and II:
Rate of Return if State Occurs
Probability of State of
State of Economy
Economy
Recession
Normal
8.30
8.38
Irrational
exuberance
8.48
Stock I
8.03
8.37
8.31
Stock II
-8.38
8.14
2.47
The market risk premium is 8 percent and the risk-free rate is 40.5 percent.
a-1. What is the beta of each stock?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Stock I
Stock
Beta
a-2. Which stock has the most systematic risk?
○ Stock I
○ Stock Il
b-1. What is the standard deviation of each stock?
Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.
Standard Deviation
Stock
Stock I
b-2. Which one has the most unsystematic risk?
○ Stock I
O Stock Il
c. Which stock is "riskier"?
○ Stock I
○ Stock Il
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Recommended textbooks for you
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)