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
3.0%
31
Defensive Stock
4.8%
14
a. What are the betas of the two stocks? (Round your answers to 2 decimal places.)
Beta A = _______________
Beta D=________________
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.)
Return of Beta A = _________%
Return of Beta D = _________%
c. If the T-bill rate is 7%, 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 = ______________%