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Yang Su is considering the following information on two stocks:

Rate of Return

State of Economy Probability Catherine Lam Inc.(A) David So Ltd(B)

Recession 0.30 0.08 -0.20

Normal 0.50 0.40 0.15

Boom 0.20 0.20 0.42

The market risk premium is 8% and the risk free rate is 6%. Which stock has the most systematic risk? Which one has the most unsystematic risk? Which stock is riskier? Explain

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M9617874

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