Question: 4.) Consider the expected return for two stocks in two different market conditions: Market Return Aggressive Stock Defensive Stock 8% 5% 6% 20% 34% 14%

4.) Consider the expected return for two stocks in two different market conditions:

Market Return

Aggressive Stock

Defensive Stock

8%

5%

6%

20%

34%

14%

a. What are the betas of the two stocks?

b. What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%?

c. What are the alphas of each?

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