You are examining two stocks - Bassett Inc and Hound Corporation. The risk-free rate is 3% and the market risk premium is 5%. The following table provides some information. Next year's expected Beta Current Price (Po) Dividends (D1) Price (P1) Bassett Hound 1.1 0.8 $25 $30 $1.00 $26.13 $1.20 $34.00 1. Draw the Security Market Line, label axes, identify risk free asset and market portfolio on the graph. (6 points) 2. Identify where Bassett and Hound actually lie on the graph. In other words, do they lie above, below, or on the SML? (6 points) D+P-Po Po (Hint: to identify these stocks on the graph, you need to know their beta and rate of return. Use r= return over the next year.) 3. Is Hound fairly priced, under-priced or over-priced? Please explain. (6 points) to calculate their rate of