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.

	Rate of Return
Scenario		Market				Aggressive Stock A				Defensive Stock D
Bust			5	%			9	%			3	%
Boom			12				21				10

Required: a. Find the beta of each stock. b. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. c. If the T-bill rate is 4%, what does the CAPM say about the fair expected rate of return on the two stocks? d. Which stock seems to be a better buy on the basis of your answers to (a) through (c)?

Possible answers for Required D- Stock D or Stock A.

Please show work (formulas)

Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Find the beta of each stock. (Round your answers to 2 decimal places.) Beta Stock A Stock D Required A Required B Required C Required D If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. (Enter your answers as a whole percent.) Expected Rate of Return Market portfolio % Stock A % Stock D % Required A Required B Required C Required D If the T-bill rate is 4%, what does the CAPM say about the fair expected rate of return on the two stocks? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.) Expected Rate of Return Stock A % Stock D %