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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
7% 4% 4%
25 35 13

a.

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

Beta
Aggressive Stock
Defensive Stock

b.

What is the expected rate of return on each stock if the market return is equally likely to be 7% or 25%? (Do not round intermediate calculations. Round your answers to 1 decimal place. Omit the "%" sign in your response.)

Expected Rate of Return
Aggressive Stock %
Defensive Stock %

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 market return is equally likely to be 7% or 25%? Also, assume a T-Bill rate of 4%. (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the "%" sign in your response.)

Hurdle rate %

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