1. If a stock has zero beta, then the expected return will be:

A. zero

B. the risk free rate

C. none of these

D. negative

E. the market risk premium

2. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is 0.132. If the expected market rate of return is 0.12, what is the risk-free rate?

A. 0.18

B. none of these

C. 0.06

D. 0.132

E. 0.144

F. 0.12

3. Kassa Capital Inc. is a hedge fund that specializes in mergers arbitrage. Specifically, it uses a sophisticated model using potential target companys' historical stock return performance to predict the probability of a firm getting acquired by another firm. The hedge fund has be in business for the past 10 years and it has outperformed the benchmark by 2% per year on average.

This is a __ of market efficiency. (Note: Click all options)

A. violation of strong form

B. support of strong form

C. violation of semi-strong form

D. can't tell from the information given

E. support of semi-strong form

F. violation of weak formG. support of weak form