An analyst observes that Big Box Co. has a beta of .76, and BullsEye Inc. has a beta of .91. If the risk-free rate is 3% and the expected return on the market is 9%, which of the following will result in a lower expected return?

1. A higher risk free rate, with the expected return unchanged
2. A higher beta value
3. An overall lower return on the market, with the risk free rate unchanged
4. An overall higher return on the market, with the risk free rate unchanged