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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 0.4 -5% -10% 0
2 0.6 20% 40% 15%
A. What are the s of the two stocks?
B. What is the expected rate of return on each stock?
C. If the T-bill rate is 3%, what are the s of the two stocks? = + 5 Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.4 -5% -10% 0 2 0.6 20% 40% 15%
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