Consider the Data on Expected Returns and Betas for a Variety

question 10

Multiple Choice

Consider the data on expected returns and betas for a variety of assets in the table below. What is the expected return on shares of Bank of America using the SML? $$\begin{array} { | c | c | c | } \hline \text { Asset } & \begin{array} { c } \text { Expected } \\\text { Return }\end{array} & \text { Beta } \\\hline \begin{array} { c } \text { Bank of } \\\text { America }\end{array} & & 0.9 \\\hline \text { Risk Free Asset } & 4 \% & 0 \\\hline \begin{array} { c } \text { Market } \\\text { Portfolio }\end{array} & 10 \% & 1 \\\hline\end{array}$$

• A)5.4%
• B)6.0%
• C)8.2%
• D)9.4%
• E)11.2%