Consider the following information on Stocks I and II: ...
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Accounting
| 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 | .05 | .30 | ||||||
| Normal | .45 | .22 | .10 | ||||||
| Irrational exuberance | .25 | .05 | .50 | ||||||
| The market risk premium is 6 percent, and the risk-free rate is 2 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". |
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