At this time, a T-bill has a 2% rate, the market\'s expected return is 8%, Stock

Question

At this time, a T-bill has a 2% rate, the market's expected return is 8%, Stock A has a beta of 1.30, and Stock B has a beta of 1.20. The expected returns for Stocks A and B have the following probability distributions: State of the Economy Probability Stock A Stock B Below average 0.20 -12% -9% Average 0.60 11 10 Above Average 0.20 30 26 The 95.5 percent confidence interval for Stock B is from: a. -12.7846% < 9.4% < 31.5846% b. -1.6923% < 9.4% < 20.4923% c. -7.3948% < 9.4% < 36.9744% d. -23.8769% < 9.4% < 42.6769% e. -18.9378% < 9.4% < 33.1484%

Explanation / Answer

c. -7.3948% < 9.4% < 36.9744%

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