1. Which one of the following statements about markets beta is incorrect?

1. Beta is a measure of how an individual stocks excess returns vary with market excess returns
2. A firm with a beta>1 is more volatile (risky) than the market
3. A firm with a beta<1 is less volatile than the market
4. A firm with a beta=1 has the average market risk
5. A firm that has a beta=1 has no risk at all

2. A project requires $1000 to be invested today, and is expects to generate cash flows in the future years: CF1=$800, CF2=$800, CF3=$200. What is the REGULAR payback period of this project?

1. 2.5 years
2. 3 years
3. 1.25 years
4. 0.5 years
5. Never pay back the cost