Question

the following table gives an analysts expected return on two stocks for particular market returns
market return aggressive stock defensive stock
6% 2% 8%
20 30 16

A) What are the betas of the two stocks?
B) What is the expected return on each stock if the market return is equally likely to be 6% or 20%?
C) If the risk-free rate is 7% and the market return is equally likely to be 6% or 20% what is the SML?
D) What are the alphas of the two stocks?

Answer 1

Answer:

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