Question: Consider the following table, which gives a security analysts expected return on two stocks and the market index in two scenarios Scenario Probability Market Return

Consider the following table, which gives a security analysts expected return on two stocks and the market index in two scenarios

Scenario Probability Market Return Aggressive Stock Defensive Stock

1 0.4 -5% -10% 0

2 0.6 20% 40% 15%

A. What are the s of the two stocks?

B. What is the expected rate of return on each stock?

C. If the T-bill rate is 3%, what are the s of the two stocks? = + 5 Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.4 -5% -10% 0 2 0.6 20% 40% 15%

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