There Is a 35% Probability That a Particular Stock Will

Multiple Choice

There is a 35% probability that a particular stock will earn a 16% return and a 65% probability that it will earn 10%. What is the risk-free rate if the risk premium on the stock is 7.5%?

A) 4.20%
B) 4.60%
C) 5.20%
D) 5.40%
E) 5.80%