Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D.

Scenario	Rate of Return
	Market	Aggressive Stock A	Defensive Stock D
Bust	8%	10%	5%
Boom	30	40	22

Required:

Find the beta of each stock.

If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock.

If the T-bill rate is 3%, what does the CAPM say about the fair expected rate of return on the two stocks?

Which stock seems to be a better buy on the basis of your answers to (a) through (c)?