Do the expected returns appear to be related to each alternative’s market risk? (2) Is it possible to choose among the alternatives on the basis of the information developed thus far?
Answer: The expected returns are related to each alternative’s market risk--that is, the higher the alternative’s rate of return the higher its beta. Also, note that t-bills have 0 risk.
We do not yet have enough information to choose among the various alternatives. We need to know the required rates of return on these alternatives and compare them with their expected returns.