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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 8% 20 Aggressive Stock
Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 8% 20 Aggressive Stock 2.5% 27 Defensive Stock 4.3% 14 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 8% or 20%? (Round your answers to 2 decimal places.) Rate of return on A % Rate of return on D % 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.) % Alpha A Alpha D %
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