QUESTION 1 Consider the following probability distribution of returns for Alpha Corporation: Current Stock Price (S Stock Price in One Year (S) Return RProbability PR 40% 096 20% 25% 50% 25% $25 The expected return for Alpha Corporation is closest to: 6.67% 10.0% 0.00% 5.00% QUESTION 2 Which of the following statements is FALSE? Volatility measures total risk, while beta measures only systematic risk. Utilities tend to be stable and highly regulated, and thus are insensitive to fluctuations in the overall market. Beta measures the sensitivity of a security to market wide risk factors. The beta is the expected percentage change in the excess return of the market portfolio for a 1% change in the excess return of a security. QUESTION 3 Suppose that the market portfolio is equally likely to increase by 24% or decrease by 8%. Security X goes up on average by 29% when the market goes up and goes down by 11% when the market goes down. Security "Y goes down on average by 16% when the market goes up and goes up by 16% when the market goes down. Security goes up on average by 4% when the market goes up and goes up by 4% when the market goes down. The beta for security 'X" is closest to: 0.80 1.00 1.25