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

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Consider the following two scenarios for the economy and the expected returns in each scenarlo for the market portfolio, an aggressive stock A, and a defensive stock D. Scenario Bust Boom Rate of Return Aggressive Defensive Market Stock A Stock D -9% -12% 32 40 27 a. Find the beta of each stock. (Round your answers to 2 decimal places.) 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. (Enter your answers as a whole percent.) Expected Rate of Return Market portfolio Stock A Stock D % c. 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 % d. Which stock seems to be a better buy on the basis of your answers to (a) through (c)? O Stock D O Stock A

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