Stock A has an expected return of 12 percent and a beta of 1.2. Stock B has an expected return of 9 percent and a beta of .8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate? Please calculate without using excel.
A. 2.5 percent B. 3.0 percent C. 3.5 percent D. 4.0 percent E. 4.5 percent