Stock X Has a Beta of

Multiple Choice

Stock X has a beta of .95 and an expected return of 10.8 percent.Stock Y has a beta of 1.2 and an expected return of 13.1 percent.What is the risk-free rate of return assuming that both stock X and stock Y are correctly priced?

A) 1.10 percent
B) 1.20 percent
C) 2.06 percent
D) 3.30 percent
E) 3.50 percent