Refer to the Following Information

Multiple Choice

Refer to the following information. Stocks A, B, and C have two risk factors with the following beta coefficients. The zero-beta return (λ₀) = 0.025 and the risk premiums for the two factors are (λ₁) = 0.12 and (λ₀) = 0.10.
Stock Factor 1 b_i1 Factor 2 b_i2
Calculate the expected returns for stocks A, B, C.
A B C

A) 0.082 0.091 0.033
B) 0.105 0.109 0.032
C) 0.132 0.128 0.033
D) 0.165 0.121 0.032
E) 0.850 0.850 0.610