Under the Following Conditions, What Are the Expected Returns for Stocks

question 25

Multiple Choice

Under the following conditions, what are the expected returns for stocks A and B? $$\begin{array} { l l } \lambda ^ { 0 } = 0.03 & b _ { a , 1 } = 1.5 \\k _ { 1 } = 0.09 & b _ { a , 2 } = 0.8 \\k _ { 2 } = 0.07 & b _ { b , 1 } = 1.20 \\& b _ { b , 2 } = 0.6\end{array}$$

• A)24.8% and 19.7%
• B)22.1% and 18.0%
• C)20.3% and 17.8%
• D)19.9% and 16.9%
• E)18.7% and 15.3%

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