Home / Questions / Consider the following table which gives a security analyst’s expected return on two sto...
Consider the following table, which gives a security analyst’s expected return on two stocks for two particular market returns: (LO 7-2)
|
5% |
2% |
3.5% |
|
20 |
32 |
14 |
What are the betas of the two stocks?
www.mhhe.com/bkm
What is the expected rate of return on each stock if the market return is equally likely to be 5% or 20%?
If the T-bill rate is 8%, and the market return is equally likely to be 5% or 20%, draw the SML for this economy.
Plot the two securities on the SML graph. What are the alphas of each?
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