Question

Consider the following information on Stocks I and II:

  

		RATE OF RETURN IF STATE OCCURS
STATE OF   ECONOMY	PROBABILITY OF STATE OF ECONOMY	STOCK I	STOCK II
Recession	0.07	0.05	0.05
Normal	0.27	0.17	0.21
Irrational exuberance	0.66	0.39	0.27

The market risk premium is 10 percent, and the risk-free rate is 4.5 percent.

For standard deviations: (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16))

For betas: (Round your 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 ____.

Answer 1