Problem 1 Consider the following table, which gives a security analyst's expected return on two stocks in two particular scenarios for the rate of return on the market: Market Return Scenario Probability Stock A Stock B of scenario 0% Recession 60% -5% 2% 12% Boom 40% 16% 8% a. What are the betas of the two stocks? b. What is the expected rate of return on each stock if the two scenarios for the market return has probabilities of 60% for the recess and 40% for boom? c. If the T-bill rate is 5% and the market return has probabilities of 60% for the recession and 40% for boom, draw the SML for this economy d. Plot the two securities on the SML graph. What are the alphas of each? e. Which of the two securities you are better off purchasing, A or B