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		.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 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  (Click to select)  II  I  is "riskier".

Answer 1