Q2. Scenario Probability Return Market AggressiveDefensive Stock Stock 2% 3.5% 14 5% 20 1 0.5 2...

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Q2. Scenario Probability Return Market AggressiveDefensive Stock Stock 2% 3.5% 14 5% 20 1 0.5 2 0.5 What are the betas of the two stocks? Q3. What is the expected rate of return on each stock? 32 Q.4 If the T-bill rate is 8%, what are the alphas of the two stocks? Q.5 If the simple CAPM is valid, is the following situation possible? Expected Standard Portfolio Return Deviation A 30% 35% B 40 25 Q.6 Calculate the return predicted by CAPM for a portfolio with a beta of 1.5. Expected Portfolio Return Beta Risk-free 10% 0 Market 18 1.0 A 16 1.5 Q.7 What is the alpha of portfolio 4. Q2. Scenario Probability Return Market AggressiveDefensive Stock Stock 2% 3.5% 14 5% 20 1 0.5 2 0.5 What are the betas of the two stocks? Q3. What is the expected rate of return on each stock? 32 Q.4 If the T-bill rate is 8%, what are the alphas of the two stocks? Q.5 If the simple CAPM is valid, is the following situation possible? Expected Standard Portfolio Return Deviation A 30% 35% B 40 25 Q.6 Calculate the return predicted by CAPM for a portfolio with a beta of 1.5. Expected Portfolio Return Beta Risk-free 10% 0 Market 18 1.0 A 16 1.5 Q.7 What is the alpha of portfolio 4.

Answer rating: 100% (QA)

SOLUTION Q2 To calculate the betas of the two stocks we can use the following formula for the beta of a stock Beta Return of Stock Riskfree Rate Return of Market Riskfree Rate For the aggressive stock ... View the full answer