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The following table provides a security analyst's expected return on two stocks in two particular scenarios for the market return. Use the above information to answer this and the next 3 questions. Consider the following statements. 1. The beta of stock A is greater than 3 . II. The beta of stock B is less than 1 . Which of the following is correct? a. Statement I is correct, Statement II is incorrect. b. Statements t and t1 are both incorrect. c. Statement I is incorrect, Statement II is correct. d. Statements t and t t are bolh correct. What is the value of the risk free rate in the above economy? a. 2% b. 3% c. 2.5% d. 3.5% Consider the following statements: I the expectod relum on the marhet is proaler than 12% 11. The expected return for stock A is less than 26%. III. The expected return for stock B is less than 114 ! Which of the following is correch? a. Statements 1,11 and ill are correct. c. Statements 1,11 and 111 are incorrect. c. Statemants 1 and 11 are correct, Statement III is incorrect. If the risk free rale is 5%, what hurdle tate should be used by the management of firm A for a project with the risk characteriticics of firm B's stock? - 384 b 126x 1c. 40+4 d 10.8%

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