Use the following information for this and the next question.

The rate of return on the risk-free asset is 3 percent.What is the expected return of the overall stock market if the market risk premium is 5 percent?

A. 10.0%

B. 10.9%

C. 13.7%

D. 8.9%

E. 18.1%

F. 8.0%

Continuing from the previous problem, note that BFA Inc. has a beta of 1.3. What is the required rate of return for the BFA Inc.?

A. 12.37%

B. 9.50%

C. 13.81%

D. 12.96%

E. 10.78%

F. 7.42%