Consider the following two scenarios for the economy and the expected returns in each scenario for the market portfolio,

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Consider The Following Two Scenarios For The Economy And The Expected Returns In Each Scenario For The Market Portfolio 1 (97.13 KiB) Viewed 23 times

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. Scenario Bust Boom Required: Rate of Return Market Aggressive Stock A -11% 33 Required A 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)? Stock A Stock D -14% 41 Complete this question by entering your answers in the tabs below. Required B Beta Defensive Stock D Required C Find the beta of each stock. Note: Round your answers to 2 decimal places. Required D -9% 25 < Required A Required B >