Question: Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability 0.5 0.5

Consider the following table, which gives a security analyst's expected return

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability 0.5 0.5 Market Return 5% 20 Aggressive Stock 28 32 Defensive Stock 3.5% 14 2 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D 2.00 0.70 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A % Rate of return on D c. If the T-bill rate is 8%, what are the alphas of the two stocks? (Leave no cells blank - be certain to enter "O" wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal place.) Alpha A Alpha D % %

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