Nile Foods stock has a beta of 1.4 and Elbe Eateries stock has a beta of 0.7. Assume that the risk-free rate, rRF, is 5.5 percent and the market risk premium, (rM rRF), equals 4 percent. Which of the following statements is most correct?

A. If the market risk premium increases but the risk-free rate remains unchanged, Niles required return will increase (since it has a beta greater than 1.0) but Elbes will decline (since it has a beta less than 1.0).

B. The standard deviation of returns for Niles Food's stock will be higher than the standard deviation of returns for Elbe Eateries' stock.

C. If expected inflation increases but the market risk premium remains unchanged, the required return will increase for both stocks but the increase will be larger for Nile since it has a higher beta.

D. If the market risk premium decreases but the risk-free rate remains unchanged, the required return on both stocks will decline by the same amount. E. If expected inflation increases but the market risk premium remains unchanged, the required return on both stocks will increase by the same amount.