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Consider the following table, which gives a security analysts expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return

Consider the following table, which gives a security analysts expected return on two stocks and the market index in two scenarios:

Scenario Probability Market Return Aggressive Stock Defensive Stock
1 0.5 5% 2.4% 4.2%
2 0.5 21 27 18

Required:

a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)

Beta A
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 %
Rate of return on D

%

c. If the T-bill rate is 7%, what are the alphas of the two stocks? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Alpha A %
Alpha D %

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