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	Rate of Return
		Aggressive	Defensive
Scenario	Market	Stock A	Stock D
Bust	-8%	-13%	-6%
Boom	26	35	19

a. Find the beta of each stock.

	Beta
Stock A	?
Stock D	?

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

	Expected Rate of Return
Market Portfolio	??%
Stock A	??%
Stock D	??%

c. If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks?

	Expected Rate of Return
Stock A	??%
Stock D	??%