Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario 1 2 Probability Market Return 0.5 0.5 Beta A Beta D 5% 20 Rate of return on A Rate of return on D Aggressive Stock 2% Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 32 % % Defensive Stock 3.5% 14 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.)
Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario 1 2 Probability Market Return 0.5 0.5 Beta A Beta D 5% 20 Rate of return on A Rate of return on D Aggressive Stock 2% Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 32 % % Defensive Stock 3.5% 14 b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
100%
Subject :- Accounting
Transcribed Image Text:Problem 7-12 (Static)
Consider the following table, which gives a security analyst's expected return on two stocks and the market index in
two scenarios:
Scenario
1
2
Probability Market Return
0.5
0.5
Beta A
Beta D
5%
20
Rate of return on A
Rate of return on D
Aggressive
Stock
2%
Required:
a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)
32
%
%
Defensive
Stock
3.5%
14
b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.)
Transcribed Image Text:c. If the T-bill rate is 8%, what are the alphas of the two stocks? (Leave no cells blank - be certain to enter "0"
wherever required. Negative values should be indicated by a minus sign. Round your answers to 1 decimal
place.)
Alpha A
Alpha D
%
%
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