Last year, Rocket Inc. earned a $19\%$ return. Farmer's Corp. earned $12\%.$ The overall market return last year was $15\%,$ and the risk$-$free rate was $4\%.$ If Rocket stock has a beta of $1\mathrm{.}8$ and Farmer's has a beta of $0\mathrm{.}5,$ which stock performed better once you take risk into account?

Rocket's expected return is $\%($Enter as a percentage and round to one decimal place.$)$

Farmer's expected return is $\%.($Enter as a percentage and round to one decimal place.$)$

Which stock performed better once you take risk into account? $($Select the best answer below.$)$

A$.$ Given its beta, Rocket should have earned a much higher return than it did $(23\mathrm{.}8\%$ vs $19\%).$ Farmer's, on the other hand, earned a higher return than we would have expected $(12\%$ vs $9\mathrm{.}5\%).$ So$,$ taking risk into account, Farmer's was the better stock.

B$.$ Given its beta, Rocket should have earned a much higher return than it did $(12\%$ vs $19\%).$ Farmer's, on the other hand, earned a higher return than we would have expected $(23\mathrm{.}8\%$ vs $9\mathrm{.}5\%).$ So taking risk into account, Rocket was the better stock.

C$.$ Given its beta, Rocket should have earned a much higher return than it did $(23\mathrm{.}8\%$ vs $19\%).$ Farmer's, on the other hand, earned a lower return than we would have expected $(9\mathrm{.}5\%$ vs $12\%)$ So taking risk into account, Rocket was the better stock. $q,$ D$.$ Given its beta, Rocket should have earned a much lower return than it did $(12\%$ vs $9\mathrm{.}5\%).$ Farmer's, on the other hand, earned a higher return than we would have expected $(19\%$ vs $23\mathrm{.}8\%).$ So taking risk into account, Rocket was the better stock.