Stock a Is a Risky Asset That Has a Beta

Multiple Choice

Stock A is a risky asset that has a beta of 1.4 and an expected return of 13.2%. Stock B is also a risky asset and has a beta of 1.25. The risk-free rate is 5.5%. Assuming both stocks are correctly priced, what is the expected return on Stock B?

A) 11.90%
B) 12.11%
C) 12.29%
D) 12.38%
E) 12.46%