Consider the table below, which gives historical returns on stock A and the market:

Year

Market Return

Stock A return

2017

.10 market return

.16 stock return

2018

.15 market return

.22 stock return

2019

.17 market return

.28 stock return

Assume that the returns above can be used to estimate distribution of future returns and the annual risk-free rate is 1.7%. Answer next 4 questions

(2 MARKS) What are the expected rates of return on stock A and the market?

a.

E(rA)=22%, E(rM)=13%

b.

E(rA)=22%, E(rM)=14%

c.

E(rA)=20%, E(rM)=11%

d.

E(rA)=23%, E(rM)=14%

e.

E(rA)=21%, E(rM)=14%