Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: Market Return Aggressive Stock Defensive Stock 68 Beta A Beta D a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 2.31 2.3% 25 Rate of return on A Rate of return on D 4.10 14 b. What is the expected rate of return on each stock if the market return is equally likely to be 6% or 16 % ? (Round your answers to 2 decimal places.) Alpha A Alpha D c. If the T-bill rate is 8%, and the market return is equally likely to be 6% or 16%, 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 for two particular market returns: Market Return Aggressive Stock Defensive Stock 68 Beta A Beta D a. What are the betas of the two stocks? (Round your answers to 2 decimal places.) 2.31 2.3% 25 Rate of return on A Rate of return on D 4.10 14 b. What is the expected rate of return on each stock if the market return is equally likely to be 6% or 16 % ? (Round your answers to 2 decimal places.) Alpha A Alpha D c. If the T-bill rate is 8%, and the market return is equally likely to be 6% or 16%, 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
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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Transcribed Image Text:Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns:
Market Return Aggressive Stock Defensive Stock
68
16
Beta A
Beta D
a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)
2.31
2.38
25
Rate of return on A
Rate of return on D
4.10
14
b. What is the expected rate of return on each stock if the market return is equally likely to be 6% or 16% ? (Round your answers to 2
decimal places.)
Alpha A
Alpha D
c. If the T-bill rate is 8%, and the market return is equally likely to be 6% or 16%, 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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