Consider the following table, which gives security analystsexpected return on two stocks in two particular scenarios for therate of return on the market:
Market return Aggressive stockDefensive stock
7% -4% 4%
23% 37% 11%
a. What is the beta of the two stocks?
b. What is the expected rate of return on each stock if the marketreturn is equally likely to be 7% or 23%?
c. What hurdle rate should be used by the management of theaggressive firm for a project with the risk characteristics of thedefensive firm’s stock if the two scenarios for the market returnare equally likely? Also, assume a T-Bill rate of 4%.

Please do not copy from Chegg. Only attempt if you are sureabout the answer. Solve in a step by step manner, explaining eachstep.