Q3) Consider the following table, which gives a security analysts expected return on two stocks in two particular scenarios for the rate of return on the market. Assume that both scenarios are equally likely to happen (i.e., probability of scenario 1 = probability of scenario 2=0.5).

	Scenarios				Market Return		Aggressive Stock		Defensive Stock
	1				5%		2%		6%
	2				25 %		38%		12%

1. What are the betas of the two stocks? (5 points)
2. Plot the two securities on the SML graph. Assume that T-bill rate is 6%. (5 points)
3. What are the alphas of each? (5 points)