1. Refer to Exhibit 3. What are the required rates of return for the three stocks (in the order A, B, C)?
   1. 13.0 percent, 10.6 percent, 8.8 percent
   2. 15.0 percent, 11.1 percent, 2.9 percent
   3. 18.7 percent, 11.1 percent, 8.8 percent
   4. 21.7 percent, 10.0 percent, 6.9 percent
   5. 25.0 percent, 11.1 percent, 7.1 percent

2. Refer to Exhibit 3. What are the estimated rates of return for the three stocks (in the order A, B, C)?

1. 13.0 percent, 10.6 percent, 8.8 percent
2. 15.0 percent, 11.1 percent, 2.9 percent
3. 18.7 percent, 11.1 percent, 8.8 percent
4. 21.7 percent, 10.0 percent, 6.9 percent
5. 25.0 percent, 11.1 percent, 7.1 percent

3. Refer to Exhibit 3. What is your investment strategy concerning the three stocks?

1. buy A and B; sell C
2. sell A, B, and C
3. sell A and B; buy C
4. buy A, B, and C
5. buy A and C; sell B

Exhibit 3 Use the information below for the following problem(s) You expect the risk-free rate (RFR) to be 4 percent and the market return to be 10 percent. You also have the following information about three stocks. Current Stock A B Beta 1.5 1.1 0.8 Price $10 $27 $35 Expected Price $11.50 $30 $36 Expected Dividend $1.00 $0.00 $1.50