In: Finance
4.) Consider the expected return for two stocks in two different market conditions:
Market Return |
Aggressive Stock |
Defensive Stock |
8% |
5% |
6% |
20% |
34% |
14% |
a. What are the betas of the two stocks?
b. What is the expected rate of return on each stock if the market return is equally likely to be 8% or 20%?
c. What are the alphas of each?
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