Which of the following statement(s) are FALSE?

Stock A has a beta of 1.2 and a standard deviation of returns of 14%. Stock B has a beta of 1.8 and a standard deviation of returns of 18%. If the risk- free rate of return increases and the market risk premium remains constant, then the required returns on stocks A and B will both increase by the same amount.

I.

2. Because the average portfolio of all investors is the market portfolio, the average alpha for all investors is 1.

3. Capital Asset Pricing Model (CAPM) assumes that investors have homogeneous risk adverse preferences toward taking on risk.

4. While CAPM requires a number of estimates, the Arbitrage Pricing Theory (APT) factors and their values are known with certainty.

1. IIandIVonly

2. IandIIIonly

3. II, III and IV only

4. I,II,IIIandIV