State of Economy: Recession, Normal, Irrational Exuberance Probabilitly of State

Question

State of Economy: Recession, Normal, Irrational Exuberance
Probabilitly of State of Economy: .25, .60, .15
Rate of Return if State Occurs (Stock I): .02, .32, .18
Rate of Return if State Occurs (Stock II): -.20, .12, .40

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

Explanation / Answer

1.2 and 12.5% this will be the answer

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