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5. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market ReturnAggressive Stock Defensive Stock
5. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market ReturnAggressive Stock Defensive Stock 5% 2.5% 4.5% 20% 31% 12% (a) What are the betas of the two stocks? (b) What is the expected rate of return on each stock if the market returns is equally likely to be 5% or 20%? (c) If the T-bill rate is 6%, calculate the alphas for the 2 stocks
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