Consider the following information about Stocks I and II: Rate of Return If State Occurs Probability of State of- Economy .15 State of Economy Stock I Stock I| Recession .05 -.21 Normal .70 .18 .10 Irrational exuberance .15 .07 .39 The market risk premium is 7 percent, and the risk-free rate is 3.5 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 return is percent, and the Stock I beta is The standard deviation on Stock Il's return is percent, and the Stock II beta is Therefore, based on the stock's systematic risk/beta, Stock is riskier.
Consider the following information about Stocks I and II: Rate of Return If State Occurs Probability of State of- Economy .15 State of Economy Stock I Stock I| Recession .05 -.21 Normal .70 .18 .10 Irrational exuberance .15 .07 .39 The market risk premium is 7 percent, and the risk-free rate is 3.5 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 return is percent, and the Stock I beta is The standard deviation on Stock Il's return is percent, and the Stock II beta is Therefore, based on the stock's systematic risk/beta, Stock is riskier.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![Consider the following information about Stocks I and ll:
Rate of Return If State
Occurs
Probability of State of-
Economy
.15
State of Economy
Stock I
Stock II
Recession
.05
-.21
Normal
.70
.18
.10
Irrational exuberance
.15
.07
.39
The market risk premium is 7 percent, and the risk-free rate is 3.5 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 l's return is
percent, and the Stock I beta is
The standard
deviation on Stock Il's return is
percent, and the Stock II beta is
Therefore, based on the
stock's systematic risk/beta, Stock
is riskier.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff2db349d-44e2-4dc0-ad50-be44fa6802da%2F35bc2e41-638b-45a8-ac2e-338c2df3893a%2Ftvz0gyt9_processed.png&w=3840&q=75)
Transcribed Image Text:Consider the following information about Stocks I and ll:
Rate of Return If State
Occurs
Probability of State of-
Economy
.15
State of Economy
Stock I
Stock II
Recession
.05
-.21
Normal
.70
.18
.10
Irrational exuberance
.15
.07
.39
The market risk premium is 7 percent, and the risk-free rate is 3.5 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 l's return is
percent, and the Stock I beta is
The standard
deviation on Stock Il's return is
percent, and the Stock II beta is
Therefore, based on the
stock's systematic risk/beta, Stock
is riskier.
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