Question: IV. Consider the following Table, which gives a security analyst's expected returns on two stocks and the market portfolio for two possible economic states: (15

IV. Consider the following Table, which gives a security analyst's expected

IV. Consider the following Table, which gives a security analyst's expected returns on two stocks and the market portfolio for two possible economic states: (15 points) Market Portfolio Aggressive Stock Defensive Stock State 1 9% State 2 9% 24% 18% a) What are the market betas of the two stocks? 3% 6% b) What is the expected rate of return on each stock if the economy is equally likely to be in the two economic states? c) If the T-bill rate is 1% and the economy is equally likely to be in the two economic states. Derive the SML. What is the alpha of each stock

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