3)A security analysts expected return on two stocks for two separate market returns are as follows:

Market return	Aggressive stock	Defensive stock
5%	2%	3.5%
20%	32%	14%

1. What are the betas of the two stocks? (5 marks)
2. What is the expected rate of return on each stock if the market return is equally likely to be 5% and 20%? (5 marks)
3. Assume the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. The rate of return of government T-bill is 5%. i)What is the expected rate of return on the market portfolio? (2 marks) ii)What would be the expected rate of return for a stock with beta=0? (3 marks) iii)Assume an investor is contemplating buying a stock at $50. The stock is expected to pay $4 dividend next year and you expect to sell the stock at $53. Considering a beta equal to -0.6, is the stock overpriced or underpriced? (10 marks)