Question: Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario 1 2 Probability

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario 1

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario 1 2 Probability 0.5 0.5 Market Return 6% 20 Aggressive Stock 2.0% 32 Defensive Stock 5.0% 15 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Beta A 2.14 Beta D 0.71 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Rate of return on A 17.00% Rate of return on D 10.00 % c. If the T-bill rate is 7%, 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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