Expected return on two stocks for two particular market returns:
Market return/Aggressive stock/Defensive St
5% -2% 6%
a. What are the beta's of the two stocks?
b. What is the expected rate of return on each stock if the market return is equally likely to be 5% or 25%?
c. If the t-bill rate is 6% and the market return is equally likely to be 5% or 25%, draw the SML for this economy.
please show all work
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