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QUESTION: 3 (a) The risk free rate is 2%. The expected rate of retum on the market is 12%. Beta and the expected rate of rettim for four stocks are as follows Stock Beta Expected return ABC 0.8 10% DEF 1.0 12% GHI 1.2 13% JKL 2.0 22% Which of these stocks should not be purchased? (9 marks) (b) Rivercraft Inc. is a manufacturer of boat parts and has been in business only a few years. Its board of directors decided to start paying a dividend to help boost the attractiveness of its stock. The dividend will be $1.00 per share next year. After that dividends are expected to increase by 5% for some foreseeable future. The company has a beta of 1.50. The market rate of retum is 9% and the risk free rate is 4%. Should you purchase shares in this firm at the current market price of $24.07 share? (6 marks) per [Total: 15 marks) ANSWER QUESTION 3 IN THE BLANK SPACES BELOW