M&M Proposition 2: Suppose a Firm Has a Cost of Equity

M&M Proposition 2: Suppose a firm has a cost of equity of 12%, a D/E or 1/6, and the YTM on its bonds is 7.5%. The risk-free rate is currently 3%. What is the current required rate of return on its assets and equity if the D/E is changed to 1/3?

A) 11.35% and 13.25%
B) 11.35% and 8.25%
C) 13.25% and 11.35%
D) None of the above.