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Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 58 25 Aggressive
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 58 25 Aggressive Stock -28 38 Defensive Stock 68 12 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Aggressive stock Defensive stock Betal b. What is the expected rate of return on each stock if the market return is equally likely to be 5 % or 25% ? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive stock Defensive stock Expected Rate of Return % e. What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firm's stock if market return is equally likely to be 5% or 25% ? Also, assume a T-Bill rate of 6%. (Do not round intermediate calculations. Round your answer to 1 decimal place.) Hurdle rate %
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