Please help!!! Consider the following two scenarios for the economy and the expected returns in each scenario

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Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio, an aggressive stock A, and a defensive stock D.

Rate of Return

Scenario Market Aggressive Defensive

Stock A Stock D

Bust -10% -12% -3%

Boom 20 30 10

Required:

a.Find the beta of each stock.

b.If each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock.

c.If the T-bill rate is 5%, what does the CAPM say about the fair expected rate of return on the two stocks?

d.Which stock seems to be a better buy on the basis of your answers to (a) through (c)?

Posted Date: May 18, 2024 11:17 PM

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Please help!!! Consider the following two scenarios for the economy and the expected returns in each scenario

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