The stock of J-Crew, Inc., is expected to return 28% annually, and the stock of Gap, Inc., is expected to return 16% annually. The beta of the J-Crew stock is 2.58, and the beta of the Gap stock is 1.35 . The risk-free rate of return is expected to be 2%, but the return on the market portfolio is 14%.

Based on the Security Market Line (SML), what are the required rates of return for J-Crew and Gap given the current market situation?

Question 22 options:

	The required rate of return for J-Crew is 36.12%, and that for Gap is 18.90%.
	The required rate of return for J-Crew is 30.96%, and that for Gap is 16.20%.
	The required rate of return for J-Crew is 32.96%, and that for Gap is 18.20%.
	The required rate of return for J-Crew is 38.12%, and that for Gap is 20.90%.