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Consider the following information on Stocks I and II: Rate of Return if State Occurs State...

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 systematic risk?

b-1. What is the standard deviation of each stock? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)

b-2. Which one has the most unsystematic risk?

c. Which stock is “riskier”?

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