at Question 36 (3 marks) Consider the following information about Stocks A and B. The market risk premium is 7%, and the

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At Question 36 3 Marks Consider The Following Information About Stocks A And B The Market Risk Premium Is 7 And The 1 (37.6 KiB) Viewed 31 times

at Question 36 (3 marks) Consider the following information about Stocks A and B. The market risk premium is 7%, and the risk-free rate is 3%. Rate of Return if State Occurs Probability Stock B State of economy Recession of state of economy 0.15 Stock A 0.02 -0.25 Normal 0.70 0.21 0.09 Irrational exuberance 9.15 0.06 0.44 Which of the two stocks has higher total risk? a. Stock B because its expected return is higher than that if Stock A b. Stock A because its standard deviation is higher than that of Stock B c. Stock B because its standard deviation is higher than that of Stock A d. The total risks for the two stocks cannot be compared due to inadequate information. Oa. Ob. O d