The stock of Milton, Inc., is expected to return 17% annually with a standard deviation of 8%. The stock of Eaton, Inc., is expected to return 28% annually with a standard deviation of 12%. The beta of the Milton stock is 1.50, and the beta of the Eaton stock is 2.2. The risk-free rate of return is expected to be 3%, but the return on the market portfolio is 14%.
Based on the Security Market Line (SML), what are the required rates of return for Milton and Eaton respectively given the current market situation?
A. The required rate of return for Milton is 19.50%, and that for Eaton is 27.20%.
B. The required rate of return for Milton is 24.00%, and that for Eaton is 33.80%.
C. The required rate of return for Milton is 21.00%, and that for Eaton is 30.80%.
D. The required rate of return for Milton is 16.50%, and that for Eaton is 24.20%.