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