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Suppose that Ford's stock volatility (i.e. standard deviation) is 40% while the market volatility is 20%. If the correlation between Ford and the market is

Suppose that Ford's stock volatility (i.e. standard deviation) is 40% while the market volatility is 20%. If the correlation between Ford and the market is 0.8, what is the expected return on Ford's stock? Assume that the expected return on the market is 12% and the risk-free rate is 4%.

A.

16.8%
B.

10.4%
C.

7.2%
D.

4%

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