Here is the information about two companies. The T-bill rate is 4% and the market risk premium is 6%.

CompanyBill's ApplianceDollar Spruce

Beta 1.5 1.2

Actual return12%11.2%

What is the expected return for these companies, according to the capital asset pricing model (CAPM)?

(Denote Bill's Appliance by subscriptBand Dollar Spruce by subscriptD.)

A. E(RB) = 12% and E(RD) = 11.2%

B. E(RB) = 7% and E(RD) = 6.4%

C. E(RB) = 13% and E(RD) = 6.4%

D. E(RB) = 13% and E(RD) = 11.2%