Question 1 ( 5 points) Sunshine Co.'s stock has a 15% chance of producing a 20% return, a 60% chance of producing a 10% return, and a 25% chance of producing a 15% return. What is the firm's expected rate of return? a) 3.12% b) 5.25% c) 3.55% d) 4.05% e) 2.72% Suppose that Federal Reserve actions have caused a decrease in the risk-free rate, Question 2 (5 points) rRF. Meanwhile, the market risk premium, (rMrRR), has decreased as well. Under these conditions, with other things held constant, which of the following statements a) The required return on all stocks would increase, but the increase would be is most correct? greatest for stocks with betas of less than 1.0. b) The prices of all stocks would increase, but the percent changes in stock prices would be greatest for high-beta stocks. c) The prices of all stocks would decline, but the decline would be greatest for high-beta stocks. d) The prices of all stocks would increase, but the percent changes in stock prices would be greatest for low-beta stocks. Stocks' required returns would change, but so would expected returns, and the result would be no change in stocks' prices. Question 1 ( 5 points) Sunshine Co.'s stock has a 15% chance of producing a 20% return, a 60% chance of producing a 10% return, and a 25% chance of producing a 15% return. What is the firm's expected rate of return? a) 3.12% b) 5.25% c) 3.55% d) 4.05% e) 2.72% Suppose that Federal Reserve actions have caused a decrease in the risk-free rate, Question 2 (5 points) rRF. Meanwhile, the market risk premium, (rMrRR), has decreased as well. Under these conditions, with other things held constant, which of the following statements a) The required return on all stocks would increase, but the increase would be is most correct? greatest for stocks with betas of less than 1.0. b) The prices of all stocks would increase, but the percent changes in stock prices would be greatest for high-beta stocks. c) The prices of all stocks would decline, but the decline would be greatest for high-beta stocks. d) The prices of all stocks would increase, but the percent changes in stock prices would be greatest for low-beta stocks. Stocks' required returns would change, but so would expected returns, and the result would be no change in stocks' prices