Question: Consider the following table, which gives a security analysts expected return on two stocks in two particular scenarios for the rate of return on the

Consider the following table, which gives a security analysts expected return on two stocks in two particular scenarios for the rate of return on the market

Market Return	Aggressive Stock	Defensive Stock
4%	-2%	5%
25	36	11

What are the betas of the two stocks? (2 decimals)

	Beta
Aggressive Stock
Defensive Stock

What is the expected rate of return on each stock if the two scenarios for the market return are equally likely to be 4% or 25%?

	Expected Rate of Return
Aggressive Stock	%
Defensive Stock	%

What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firms stock if the two scenarios for the market return are equally likely? Also, assume a T-Bill rate of 5%. (2 decimal)

Hurdle Rate

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