The following table provides a security analyst's expected return on two stocks in two particular scenarios for the market return.

State	Probability	Market return %	Stock A return %	Stock B return %
Poor	0.25	4	5.5	3.8
Good	0.75	15	33	12.6

If the risk free rate is 5%, what hurdle rate should be used by the management of firm A for a project with the risk characteristics of firm B's stock?

a.

10.4%

b.

10.8%

c.

12.6%

d.

3.8%