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Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Aggressive Stock Defensive Stock
Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Aggressive Stock Defensive Stock Scenario Probability Market Return 1 0.5 5% 2% 3.5% 2 0.5 20 32 14 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A 2.00 0.70 Beta D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A 17.00 % 8.75:% Rate of return on D c. If the T-bill rate is 8%, what are the alphas of the two stocks? (Leave no cells blank - be certain to enter "0" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.) % Alpha A Alpha D %
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