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Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns:
Market Return 8% 20
Aggressive Stock 3.5% 26
Defensive Stock 5.3% 10
a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)
Beta A = 1.88
Beta D= 0.39
b. What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%? (Round your answers to 2 decimal places.)
Rate of return on A %=
Rate of return on D %=
d. If the T-bill rate is 8%, and the market return is equally likely to be 8% or 20%, what are the alphas of the two stocks? (Negative values should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Alpha A %=
Alpha D %=
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