Stock a has an expected return of 12 and a beta of 12 stock, Financial Management

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Stock a has an expected return of 12 and a beta of 12 stock

Stock A has an expected return of 12% and a beta of 1.2. Stock B has an expected return of 9% and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? (Please explain the calculation.)

a. 3.0%

b. 4.0%

c. 4.5%

d. 2.5%

e. 3.5%

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Financial Management: Stock a has an expected return of 12 and a beta of 12 stock

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Financial Management: Stock a has an expected return of 12 and a beta of 12 stock

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