In: Finance
You are given the following information about Stocks A and B:
Rate of Return if State Occurs |
|||
State of Economy |
Probability of |
Stock A |
Stock B |
Boom |
0.30 |
22% |
17% |
Normal |
0.50 |
16% |
7% |
Recession |
0.20 |
-3% |
2% |
Stock A has a beta of 1.5 and Stock B has a beta of 1.2.