Question
In: Finance
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
| State of | Probability of | Rate of Return if State Occurs | |||||||||
| Economy | State of Economy | Stock I | Stock II | ||||||||
| Recession | .27 | .030 | ? | .22 | |||||||
| Normal | .62 | .330 | .14 | ||||||||
| Irrational exuberance | .11 | .190 | .42 | ||||||||
The market risk premium is 11.2 percent, and the risk-free rate
is 4.2 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers to 2 decimal places, e.g.,
32.16.)
| Stock I | |||
| Beta | |||
| Standard deviation | % | ||
Calculate the beta and standard deviation of Stock II. (Do not round intermediate calculations. Enter the standard deviation as a percent and round both answers to 2 decimal places, e.g., 32.16.)
| Stock II | |||
| Beta | |||
| Standard deviation | % | ||
Which stock has the most systematic risk?
| Stock I | |
| Stock II |
Which one has the most unsystematic risk?
| Stock I | |
| Stock II |
Which stock is “riskier”?
| Stock I | |
| Stock II |
Solutions
jeff jeffy answered 2 years agoRelated Solutions
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of Probability of Rate of Return if State Occurs
Economy State of Economy Stock I Stock II
Recession .21 .015 ? .31
Normal .56 .325 .23
Irrational exuberance .23 .185 .41
The market risk premium is 11.1 percent, and the risk-free rate
is 4.1 percent.
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percent and round both answers...
Consider the following information on Stocks I and II: State of Probability of Rate of Return...
Consider the following information on Stocks I and II:
State of
Probability of
Rate of Return if State Occurs
Economy
State of Economy
Stock I
Stock II
Recession
.22
.045
−
.37
Normal
.62
.355
.29
Irrational exuberance
.16
.215
.47
The market risk premium is 11.7 percent, and the risk-free rate
is 4.7 percent.
Calculate the beta and standard deviation of Stock I. (Do
not round intermediate calculations. Enter the standard deviation
as a percent and round both answers...
Consider the following information on Stocks I and II: Rate of Return If State Occurs Probability...
Consider the following information on Stocks I and II:
Rate of Return If State Occurs
Probability of
State of Economy
State of Economy
Stock I
Stock II
Recession
.35
.03
-.23
Normal
.30
.39
.14
Irrational exuberance
.35
.33
.49
The market risk premium is 10 percent, and the risk-free rate
is 4.5 percent.
1-a.
What is the beta of each stock? (Do not round
intermediate calculations. Round your answers to 2 decimal
places.)
Beta
Stock I
Stock II...
Consider the following information on Stocks I and II: RATE OF RETURN IF STATE OCCURS...
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
0.13
0.15
0.05
Normal
0.14
0.25
0.25
Irrational exuberance
0.73
0.29
0.43
The market risk premium is 11 percent, and the risk-free rate
is 6.05 percent.
For standard deviations: (Do not include the
percent signs (%). Round your answers to 2 decimal...
Consider the following information about Stocks I and II: Rate of Return if State Occurs State...
Consider the following information about Stocks I and II:
Rate of Return if State Occurs
State of
Probability of
Economy
State of Economy
Stock I
Stock II
Recession
.26
.05
−
.31
Normal
.50
.22
.11
Irrational exuberance
.24
.05
.51
The market risk premium is 5 percent, and the risk-free rate is
3 percent.
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...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .04 ?.19 Normal .50 .16 .06
Irrational exuberance .20 .05 .39 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...
Consider the following information about Stocks I and II: Rate of Return If State Occurs State...
Consider the following information about Stocks I and II: Rate
of Return If State Occurs State of Probability of Economy State of
Economy Stock I Stock II Recession .30 .08 −.27 Normal .45 .19 .14
Irrational exuberance .25 .13 .47 The market risk premium is 8
percent, and the risk-free rate is 6 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 on Stocks I and II: State of Economy Probability of State of...
Consider the
following information on Stocks I and II:
State of Economy
Probability of
State of Economy
Rate of Return if
State Occurs
Stock I
Stock II
Recession
.20
.02
−.20
Normal
.55
.32
.12
Irrational exuberance
.25
.18
.40
The market risk premium is 7 percent, and the risk-free rate is
4 percent.
Calculate the beta and standard deviation for both stocks
Also include which one has more systematic risk, and which is
riskier?
Consider the following information on Stocks I and II: State of Economy Probability of State of...
Consider the following information on Stocks I and II:
State of Economy
Probability of
State of Economy
Rate of Return if State Occurs
Stock I
Stock II
Recession
.22
.055
−.27
Normal
.67
.355
.19
Irrational exuberance
.11
.215
.47
The market risk premium is 11.7 percent, and the risk-free rate is
4.7 percent.
Requirement 1:
(a)
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percentage. Round your...
Consider the following information on Stocks I and II: State of Economy Probability of State of...
Consider the following information on Stocks I and II: State of
Economy Probability of State of Economy Rate of Return if State
Occurs Stock I Stock II Recession .24 .030 −.34 Normal .59 .340 .26
Irrational exuberance .17 .200 .44 The market risk premium is 11.4
percent, and the risk-free rate is 4.4 percent. Requirement 1: (a)
Calculate the beta and standard deviation of Stock I. (Do not round
intermediate calculations. Enter the standard deviation as a
percentage. Round your...
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