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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 Aggressive Stock Defensive Stock
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: |
Market Return | Aggressive Stock | Defensive Stock | |||||||||
6.76 | % | 1.01 | % | 1.76 | % | ||||||
18.01 | 35.01 | 12.26 | |||||||||
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 if the market return is equally likely to be 6.76% or 18.01%? (Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
Rate of return on A | % |
Rate of return on D | % |
(c) | What is the expected rate of return for the market, if the T-bill rate is 5.26%, and the market return is equally likely to be 6.76% or 18.01%? (Round your answer to 2 decimal places. Omit the "%" sign in your response.) |
Expected rate of return | % |
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