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	11%	14%	9%
Boom	33	41	25

Required:

1. Find the beta of each stock.
2. If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock.
3. If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks?
4. Which stock seems to be a better buy on the basis of your answers to (a) through (c)?