12. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: (LO 7-2) Market Return Aggressive Stock Defensive Stock 5% 2% 3.5% 20 32 14 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 equally likely to be 5% or 20%? c. If the T-bill rate is 8%, and the market return is equally likely to be 5% or 20%, draw the SML for this economy. d. Plot the two securities on the SML graph. What are the alphas of each? e What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firm's stock? 12. Consider the following table, which gives a security analyst's expected return on two stocks for two particular market returns: (LO 7-2) Market Return Aggressive Stock Defensive Stock 5% 2% 3.5% 20 32 14 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 equally likely to be 5% or 20%? c. If the T-bill rate is 8%, and the market return is equally likely to be 5% or 20%, draw the SML for this economy. d. Plot the two securities on the SML graph. What are the alphas of each? e What hurdle rate should be used by the management of the aggressive firm for a project with the risk characteristics of the defensive firm's stock