Problem $12-14$ Expected Returns $($LO$2)$

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 $D.$

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 $4\%,$ 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$)?$