Question: Does anyone know how to do this question Question 1 (15 points) Consider the following table which gives a stock analyst's estimates about two stocks

Does anyone know how to do this question Question 1 (15

Does anyone know how to do this question

Question 1 (15 points) Consider the following table which gives a stock analyst's estimates about two stocks Stock Expected Return Standard Deviation Beta 2 Aggressive Stock Defensive Stock Market 3-month T-bills 20% 10% i 5% 3% 12% 20% 18% 0% 0 (a) (3 points) What is the expected return on each stock according to the CAPM? (b) (2 points) What is the covariance between the aggressive stock and the defens according to the CAPM? (c) (4 points) Plot the two stocks on the SML. What are the alphas of each stock (d) (3 points) If the CAPM is true, what would be your trading strategy? (e) (3 points) Which asset has the best risk-return trade-off? Is your answer co the CAPM? Why or why not

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