Consider the following situation: State of Economy Probability of State

Consider the following situation:

State of Economy

Probability of State of Economy

Returns if State Occurs

Stock A

Stock B

Stock C

Boom

20%

25%

10%

5%

Recession

80%

-30%

5%

10%

The expected return on the market portfolio is 7% and the US Treasury bill yields 3%. The capital market is currently in equilibrium.

(a) Which stock has the most systematic risk? Why? Provide all the steps and
equations.

(b) Which stock has the most unsystematic risk? Why? Provide all the steps and
equations.

(c) What is the standard deviation of a portfolio which is comprised of $8400 invested in
stock A $3600 in stock B and $8000 in stock C?

Show work please so I know how to find the answer. Thanks!