Stock I's return =0.30*0.09+0.45*0.16+0.25*0.10 =12.40%
Stock II's return =0.30*-0.24+0.45*0.11+0.25*0.44 =8.75%
Standard Deviation of Stock I
=(0.30*(0.09-12.40%)^2+0.45*(0.16-12.40%)^2+0.25*(0.10-12.40%)^2)^0.5
=3.28%
Stock I beta =(Expected Return -Risk Free Rate)/(Market Return-Risk
Free Rate) =(12.40%-4%)/(8%-4%) =2.1
Standard Deviation of Stock II
=(0.30*(-0.24-8.75%)^2+0.45*(0.11-8.75%)^2+0.25*(0.44-8.75%)^2)^0.5
=25.19%
Stock II beta =(Expected Return -Risk Free Rate)/(Market
Return-Risk Free Rate) =(8.75%-4%)/(8%-4%) =1.19
Stock I is more risky because its beta is higher.
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and I: Rate of Return If State Occurs State of Probability of State of Economy Stock I Stock II Economy 30 Recession 09 -24 Normal Irrational exuberance .45 16 11 .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...
Consider the following information about Stocks I and I Rate of Return If State Occurs State of Economy Recession Normal Irrational exuberance Probability of State of Economy .26 .56 Stock .03 20 Stock II -.34 .14 .09 .54 The market risk premium is 5 percent, and the risk-free rate is 3 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 bets answers to 2 decimal places,...
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Consider the following information about Stocks I and II: Rate of Return If State Occurs State of Economy Recession Normal Irrational exuberance Probability of State of Economy .20 .45 .35 Stock I .03 Stock II -.20 .05 .38 .28 .04 The market risk premium is 8 percent, and the risk-free rate is 4 percent. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Enter your return answers as a percent.) The standard deviation on Stock...
Consider the following information about Stocks I and II: Rate of Return If State Occurs Stock State of Economy Recession Normal Irrational exuberance Probability of State of Economy .26 56 Stock Il -.34 20 The market risk premium is 5 percent, and the risk-free rate is 3 percent. (Do not round Intermediate calculations. Enter your standard deviation answers as a percent rounded to 2 decimal places, e.g., 32.18. Round your bets answers to 2 decimal places, e.g., 32.16.) The standard...
S13-26 Systematic versus Unsystematic Risk (LO3] Consider the following information about Stocks I and II: Rate of Return If State Occurs Probability of State of Economy .15 Stock Stock 11 --23 State of Economy Recession Normal Irrational exuberance .03 .20 .70 .09 .15 .08 .43 The market risk premium is 7 percent, and the risk-free rate is 3.5 percent. (Round your answers to 2 decimal places, e.g., 32.16.) The standard deviation on Stock I's return is deviation on Stock Il's...
Consider the following information about Stocks I and I: Rate of Return If State Occurs State of Probability of State of Economy 25 Economy Recession Normal Stock Stock II 05 -28 55 20 15 Irrational exuberance 20 .14 48 The market risk premium is 8 percent, and the risk-free rate is 5 percent. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Enter your return answers as a percent.) The standard deviation on Stock l's...
Problem 13-26 Systematic versus Unsystematic Risk [LO3] Consider the following information about StocksI and II: Rate of Return If State Occurs State of Economy Stock II Probability of State of Economy .25 .45 .30 Stock .06 21 - 29 Recession Normal Irrational exuberance .09 .15 49 The market risk premium is 8 percent, and the risk-free rate is 4 percent. (Do not round intermediate calculations. Round your answers to 2 decimal places, e.g., 32.16. Enter your return answers as a...
onsider the following information on Stocks I and II: Rate of Return if State Occurs Probability of State of Economy Stock Il Stock I .055 State of Economy Recession Normal Irrational exuberance 24 .64 - 39 365 31 49 12 .225 The market risk premium is 11.9 percent, and the risk-free rate is 4.9 percent a. Calculate the beta and standard deviation of Stock I. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both...