The Risk-Free Rate of Return Is 2% While the Market

Multiple Choice

The risk-free rate of return is 2% while the market rate of return is 12%.Parson Company has a historical beta of .85.Today, the beta for Delta Company was adjusted to reflect internal changes in the structure of the company.The new beta is 1.38.What is the amount of the change in the expected rate of return for Delta Company based on this revision to beta?

A) 8.5%
B) 5.3%
C) 12.2%
D) 14.0%