Problem 12-14 Expected Returns (LO2) 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 Aggressive Defensive Stock D Scenario Bust Boom Market -94 30 Stock A -101 40 -58 22 os 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 3%, 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)? Complete this question by entering your answers in the tabs below. Required A Required B Required C Required D Find the beta of each stock. (Round your answers to 2 decimal places.) Beta Stock A Stock D d. Which stock seems to be a better buy on the basis of your answers to (a) through (c)? Complete this question by entering your answers in the tabs below. Required A Required B Required Required D It each scenario is equally likely, find the expected rate of return on the market portfolio and on each stock. (Enter your answers as a whole percent.) Expected Rate of Return %% Market portfolio Stock % Complete this question by entering your answers in the tabs below. Required A Required B Required Required D which stock seems to be a better buy on the basis of your answers to (a) through (c)? Better buy Required Read