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Consider the following table, which gives a security analysts expected return on two stocks in two particular scenarios for the rate of return on the

Consider the following table, which gives a security analysts expected return on two stocks in two particular scenarios for the rate of return on the market:

Market Return Aggressive Stock Defensive Stock
7 % 4 % 3 %
24 34 12

a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

b. What is the expected rate of return on each stock if the two scenarios for the market return are equally likely to be 7% or 24%? (Do not round intermediate calculations. Round your answers to 1 decimal place.)

e. What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firms stock if the two scenarios for the market return are equally likely? Also, assume a T-Bill rate of 3%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

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