Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Recession Normal 8.30 8.38 Irrational exuberance 8.48 Stock I 8.03 8.37 8.31 Stock II -8.38 8.14 2.47 The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock I Stock Beta a-2. Which stock has the most systematic risk? ○ Stock I ○ Stock Il b-1. What is the standard deviation of each stock? Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation Stock Stock I b-2. Which one has the most unsystematic risk? ○ Stock I O Stock Il c. Which stock is "riskier"? ○ Stock I ○ Stock Il
Consider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of State of Economy Economy Recession Normal 8.30 8.38 Irrational exuberance 8.48 Stock I 8.03 8.37 8.31 Stock II -8.38 8.14 2.47 The market risk premium is 8 percent and the risk-free rate is 40.5 percent. a-1. What is the beta of each stock? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Stock I Stock Beta a-2. Which stock has the most systematic risk? ○ Stock I ○ Stock Il b-1. What is the standard deviation of each stock? Note: Do not round Intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. Standard Deviation Stock Stock I b-2. Which one has the most unsystematic risk? ○ Stock I O Stock Il c. Which stock is "riskier"? ○ Stock I ○ Stock Il
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 12MC
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