Expected return on two stocks for two particular market returns:

a$.$ What are the betas of the two stocks?

b$.$ What is the expected rate of return on each stock if the market return is $60\%$ likely to be $5\%$ and $40\%$

likely to be $30\%?$

c$.$ If the T$-$bill rate is $4\mathrm{.}5\%$ and the market return $60\%$ likely to be $5\%$ and $40\%$ likely to be $30\%,$ draw the

SML for this economy.

d$.$ Between aggressive and defensive stocks, which one is undervalued, which is overvalued, and why?