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6. (TCO 8) For this exercise, use the information...

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6. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. What is the beta and standard deviation of Stock I? (Points: 3) 1.2 and 24% 0.6 and 12% 1.2 and 12.5% Cannot be determined with the information given 7. (TCO 8) For this exercise, use the information provided for Problem 30 of Chapter 11 (page 375 of your textbook). Assume that the probability of the state of the economy has changed as follows: The probability of a recession has increased to 30% and the probability for a normal state of economy is now 40%. The market risk premium has increased by 1% as well. Which statement is true? Select all that apply: (Points: 4) Stock II has more risk than Stock I Stock II has less systematic risk than Stock I Stock I has a higher risk premium than Stock II Stock I has a greater expected return than Stock II,Rate of Return if state occurs State of Economy Probability Stock1 Stock2 Recession .25 .02 -.20 Normal .60 .32 .12 Irrational .15 .18 .40

 

Paper#12137 | Written in 18-Jul-2015

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