2 3 Suppose you have the following data on two securities. One stock is aggessive while the other is defensive. Market Aggressive Return Stock 4 Defensive Stock 5 Weight 60.0% 6 current 8.5% -5.0% 4.8% 7 prior 18.0% 31.0% 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 + WdRd 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 beta of the Defensive Stock? a. Beta of Defensive Stock = .44 b.Beta of Defensive Stock = .88 C. Beta of Defensive Stock = .66 d. Beta of Defensive Stock = .55