1 6 2 3 4 2 3 4 Suppose you have the following data on two securities. One stock is aggessive while the other is defensive. Market Aggressive Return Stock current 8.5% -5.0% prior 18.0% 31.0% Defensive Stock 5 Weight 60.0% 6 4.8% 7 10.0% 40.0% 8 9 10 11 12 Beta represents the change in the stock return per unit change in the market return. Beta is the difference in the returns across the 2 stocks divided by the difference in the market return. The scenarios have a 60% 40% likelihood. The Weighted Average Expected Return = Wa Ra + Wd*Rd Beta of aggressive stock = (current aggressive return-prior aggressive return)(current markt return-prior market return) Beta of defensive stock = (current defensive return-prior defensive return)/(current market return - prior market return) There are 4 questions related to this data. All percentages and dollar amounts should be taken out to 2 places. 13 14 15 16 What is the weighted average expected return for the Defensive Stock? a. Weighted Average Expected Return for Defensive Stock = 5.90% b. Weighted Average Expected Return for Defensive Stock = 9.50% c. Weighted Average Expected Return for Defensive Stock = 6.90% d. Weighted Average Expected Return for Defensive Stock = 8.90%