Consider the following information about Stocks I and II: Rate of Return If State Occurs Probability of State of- Economy .15 State of Economy Stock I Stock I| Recession .05 -.21 Normal .70 .18 .10 Irrational exuberance .15 .07 .39 The market risk premium is 7 percent, and the risk-free rate is 3.5 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 percent, and the Stock I beta is The standard deviation on Stock Il's return is percent, and the Stock II beta is Therefore, based on the stock's systematic risk/beta, Stock is riskier.
Consider the following information about Stocks I and II: Rate of Return If State Occurs Probability of State of- Economy .15 State of Economy Stock I Stock I| Recession .05 -.21 Normal .70 .18 .10 Irrational exuberance .15 .07 .39 The market risk premium is 7 percent, and the risk-free rate is 3.5 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 percent, and the Stock I beta is The standard deviation on Stock Il's return is percent, and the Stock II beta is Therefore, based on the stock's systematic risk/beta, Stock is riskier.
Chapter8: Analysis Of Risk And Return
Section: Chapter Questions
Problem 25P
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