Problem 4 (25 marks). Consider the following table, which gives a security analysts ex- pected return on two stocks for two particular market returns: States Market Return Aggressive Stock Defensive Stock Bad Good 5% 25% -2% 38% 6% 12% 5 marks] b) What is the expected rate of return on each stock if the market return is equally likely 5 marks c) If the T-bill rate is 6% and the market return is equally likely to be 5% or 25%, draw 5 marks) d) Plot the two securities on the SML graph. What are the alphas of each? 10 marks a) What are the betas of the two stocks? to be 5% or 25%? the SML for this economy