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

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

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Aggressive Defensive Scenario 1 Probability 0.5 2 0.5 Market Return 8% 20 Stock 3.5% Stock 5.3% 26 10 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A Beta D 0.50 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? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Alpha A Alpha D % %

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