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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 Beta A Beta D Probability Market Return 0.5 0.5 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on D 6% 16 Alpha A Alpha D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Aggressive Stock 2.6% 27 % % Defensive Stock 4.4% 14 % % c. If the T-bill rate is 7%, 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.)

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 Beta A Beta D Probability Market Return 0.5 0.5 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) Rate of return on A Rate of return on D 6% 16 Alpha A Alpha D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) Aggressive Stock 2.6% 27 % % Defensive Stock 4.4% 14 % % c. If the T-bill rate is 7%, 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.)

Essentials Of Investments
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
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eBookPrintReferencesCheck my workCheck My Work button is now enabled1Item 1 Consider the following table, which gives a security analyst’s expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return Aggressive Stock Defensive Stock 1 0.5 6% 2.6% 4.4% 2 0.5 16 27 14 Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) c. If the T-bill rate is 7%, what are the alphas of the two stocks? (Negative values s  

 

hould be indicated by a minus sign. Do not round intermediate calculations. Round your

Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return 1 0.5 0.5 2 Beta A Beta D Rate of return on A Rate of return on D 6% Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 16 Alpha A Alpha D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) % % Aggressive Stock 2.6% 27 Defensive Stock 4.4% 14 % % c. If the T-bill rate is 7%, 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.)
Transcribed Image Text:Consider the following table, which gives a security analyst's expected return on two stocks and the market index in two scenarios: Scenario Probability Market Return 1 0.5 0.5 2 Beta A Beta D Rate of return on A Rate of return on D 6% Required: a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 16 Alpha A Alpha D b. What is the expected rate of return on each stock? (Round your answers to 2 decimal places.) % % Aggressive Stock 2.6% 27 Defensive Stock 4.4% 14 % % c. If the T-bill rate is 7%, 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.)
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