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Calculate the expected return of stock

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Reference no: EM133057485

Consider the following information on Stock I and Stock II

State of Economy

Probability of State of Economy

Rate of Return if State Occurs

 

 

Stock I

Stock II

Recession

0.25

0.05

-0.18

Normal

0.50

0.19

0.14

Boom

0.25

0.13

0.29

The market risk premium is 8 percent, and the risk-free rate is 5 percent.

Required:

  1. Calculate the Expected Return of Stock I.
  2. Calculate the Standard Deviation of Stock I.
  3. Calculate the Expected Return of Stock II.
  4. Calculate the Standard Deviation of Stock II.
  5. Find out the Beta of Stock I.
  6. Find out the Beta of Stock II.
  7. Which stock has the most systematic risk?
  8. Which one has the most unsystematic risk?
  9. Which stock is "riskier" and why

Reference no: EM133057485

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