Assuming that the Capital asset pricing model (CAPM) holds, you are analyzing two stocks: Both A and B lie on the Security Market Line (SML). Stock A earns an expected return of 10%, and stock B earns an expected return of 8%. The beta of stock A is 1.2, while the beta of stock B is 0.8 Part 1: What is the risk-free rate in the market?

A- 6% B- 5% C- 4% D- 3% E- 2% Part 2: What is the expected return on the SML with a beta of 2?

A- 19% B- 18% C- 17% D- 14% E- 8%