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

Multiple Choice

Under the following conditions, what are the expected returns for stocks X and Y?

$\begin{array}{ll}\lambda^{0}=0.05 & b_{x, 1}=0.90 \\k_{1}=0.03 & b_{x, 2}=1.60 \\k_{2}=0.04 & b_{y, 1}=1.50 \\& b_{y, 2}=0.85\end{array}$

A) 14.1% and 12.9%
B) 12.5% and 19.5%
C) 19.5% and 18.5%
D) 21.2% and 18.5%
E) None of the above