Consider the following table, which gives a security analyst's expected return on two stocks for two...

 

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Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 7% 21 Aggressive Stock -4% 38 Defensive Stock 7% 10 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Beta Defensive Stock b. What is the expected rate of return on each stock if the market return is equally likely to be 7% or 21% ? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Defensive Stock Expected Rate of Return 17.00 % % D2L Mock Trading Game for Deri x M Question 3 - Assignment 3b x C Dashboard Dashboard Course Hero x + ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.co... Assignment 3b - Five CAPM Calculations i Saved Relaunch to update Help Save & Exit Submit 3 5 points Q H a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Defensive Stock Beta Check my work eBook b. What is the expected rate of return on each stock if the market return is equally likely to be 7% or 21%? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Print References Aggressive Stock Defensive Stock Expected Rate of Return 17.00 % % c. This part of the question is not part of your Connect assignment. d. This part of the question is not part of your Connect assignment. e. What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firm's stock if market return is equally likely to be 7% or 21%? Also, assume a T-Bill rate of 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Hurdle rate % Mc Graw Hill Type here to search < Prev. 3 of 5 Score.answer ^ PRE 2:37 PM 10/15/2023 Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return 7% 21 Aggressive Stock -4% 38 Defensive Stock 7% 10 a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Beta Defensive Stock b. What is the expected rate of return on each stock if the market return is equally likely to be 7% or 21% ? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Defensive Stock Expected Rate of Return 17.00 % % D2L Mock Trading Game for Deri x M Question 3 - Assignment 3b x C Dashboard Dashboard Course Hero x + ezto.mheducation.com/ext/map/index.html?_con=con&external_browser=0&launchUrl=https%253A%252F%252Fnewconnect.mheducation.co... Assignment 3b - Five CAPM Calculations i Saved Relaunch to update Help Save & Exit Submit 3 5 points Q H a. What are the betas of the two stocks? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Aggressive Stock Defensive Stock Beta Check my work eBook b. What is the expected rate of return on each stock if the market return is equally likely to be 7% or 21%? (Do not round intermediate calculations. Round your answers to 1 decimal place.) Print References Aggressive Stock Defensive Stock Expected Rate of Return 17.00 % % c. This part of the question is not part of your Connect assignment. d. This part of the question is not part of your Connect assignment. e. What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firm's stock if market return is equally likely to be 7% or 21%? Also, assume a T-Bill rate of 7%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Hurdle rate % Mc Graw Hill Type here to search < Prev. 3 of 5 Score.answer ^ PRE 2:37 PM 10/15/2023

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To calculate the betas of the two stocks we need to use the formula Beta Covariancestock market Variancemarket Given the expected returns on the two s... View the full answer