Question
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
8% 2.9% 4.7%
20 29 12
a.What are the betas of the two stocks?(Round your answers to 2 decimal places.)
BetaA. _______
BetaD. _______
b.What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%?(Round your answers to 2 decimal places.)
Rate of return onA _______%
Rate of return onD _______%
c.If the T-bill rate is 8%, and the market return is equally likely to be 8% or 20%, 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.)
AlphaA ______%
AlphaD _______%
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