Consider the following two scenarios for the economy and the expected returns in each scenario for...
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Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Bust Boom Market -8% 27 Aggressive Stock A Defensive Stock D -10% 41 -6% 20 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks? d. Which stock seems to be a better buy on the basis of your answers to (a) through (c)? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Find the beta of each stock. Note: Round your answers to 2 decimal places. Beta Stock A Stock D E Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D. Rate of Return Scenario Bust Boom Market -8% 27 Aggressive Stock A Defensive Stock D -10% 41 -6% 20 Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks? d. Which stock seems to be a better buy on the basis of your answers to (a) through (c)? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Find the beta of each stock. Note: Round your answers to 2 decimal places. Beta Stock A Stock D E
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