Question

Consider the following information on Stocks I and II: |

Rate of Return if State Occurs | |||||||||

State of | Probability of | ||||||||

Economy | State of Economy | Stock I | Stock II | ||||||

Recession | .25 | .06 | − | .29 | |||||

Normal | .45 | .21 | .09 | ||||||

Irrational exuberance | .30 | .15 | .49 | ||||||

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).) |

The standard deviation on Stock I's expected return is _______ percent, and the Stock I beta is _______ . The standard deviation on Stock II's expected return is _________ percent, and the Stock II beta is _______ . Therefore, Stock (I or II) is "riskier". |

Answer #1

Stock I is more riskier |

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.30
.09
−
.24
Normal
.45
.16
.11
Irrational exuberance
.25
.10
.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...

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.28
.05
−
.20
Normal
.53
.17
.07
Irrational exuberance
.19
.06
.40
The market risk premium is 8 percent, and the risk-free rate is
2 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...

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.30
.05
−
.30
Normal
.45
.22
.10
Irrational exuberance
.25
.05
.50
The market risk premium is 6 percent, and the risk-free rate is
2 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...

Consider the following information on Stocks I and II:
RATE OF RETURN IF STATE OCCURS
STATE OF
ECONOMY
PROBABILITY OF
STATE OF ECONOMY
STOCK I
STOCK II
Recession
0.06
-0.35
-0.25
Normal
0.23
0.29
0.23
Irrational exuberance
0.71
0.39
0.29
The market risk premium is 12 percent, and the risk-free rate
is 5.4 percent.
For standard deviations: (Do not include the
percent signs (%). Round your answers to 2 decimal places....

Consider the following information about Stocks I and II:
State of Economy
Probability of Economy
Rate of Return if State Occurs
Stock I
Rate of Return if State Occurs
Stock II
Recession
.26
.06
- .21
Normal
.51
.18
.08
Irrational exuberance
.23
.07
.41
The market risk premium is 5 percent, and the risk-free rate is
4 percent. (Do not round intermediate calculations. Enter the
standard deviations as a percent and round all answers to 2 decimal
places, e.g., 32.16.)...

Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.20
.010
−
.30
Normal
.55
.320
.22
Irrational exuberance
.25
.180
.40
The market risk premium is 11 percent, and the risk-free rate is
4 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock I
Stock II
Recession
.20
.03
-.22
Normal
.30
.38
.14
Irrational exuberance
.50
.32
.48
The market risk premium is 9 percent and the risk-free rate is
4.5 percent.
a-1. What is the beta of each stock?
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
a-2. Which stock has the most...

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock I
Stock II
Recession
.25
.04
-.23
Normal
.30
.30
.14
Irrational exuberance
.45
.24
.40
The market risk premium is 13 percent and the risk-free rate is
4 percent.
a-1. What is the beta of each stock?
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
a-2. Which stock has the most...

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock I
Stock II
Recession
0.45
0.03
-0.19
Normal
0.25
0.35
0.14
Irrational exuberance
0.30
0.29
0.45
The market risk premium is 12 percent and the risk-free rate is
6 percent.
a-1. What is the beta of each stock?
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
Beta
Stock I
Stock II
a-2....

Consider the following information on Stocks I and II:
Rate of Return if State Occurs
State of Economy
Probability of State of Economy
Stock I
Stock II
Recession
0.25
0.03
-0.20
Normal
0.25
0.36
0.14
Irrational exuberance
0.50
0.30
0.46
The market risk premium is 13 percent and the risk-free rate is
6 percent.
a-1. What is the beta of each stock?
(Do not round intermediate calculations. Round your answers
to 2 decimal places.)
Stock I:
Stock II:
a-2. Which...

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