The expected return for Stock A is calculated by using the factor betas and the changes in the macroeconomic factors from the baseline scenario. The baseline expected return is given as 5.0%. The "shocks" or changes from the baseline are an increase in industrial production by 1.2% (4.2% - 3.0%) and an increase in the interest rate by 0.25% (1.75% - 1.5%).

The formula to calculate the new expected return is: $\text{Expected Return for Stock A} = \text{Baseline Return} + (\beta_{\text{industrial production}} \times \text{Industrial Production Shock}) + (\beta_{\text{interest rate}} \times \text{Interest Rate Shock})$

Plugging in the values: $\text{Expected Return for Stock A} = 5.0\% + (1.3 \times 1.2\%) + (-0.75 \times 0.25\%)$ $\text{Expected Return for Stock A} = 5.0\% + 1.56\% - 0.1875\%$ $\text{Expected Return for Stock A} = 6.37\%$

Thus, the expected return for Stock A for the following year, based on the economic forecast, is 6.37%. The correct answer is B. 6.4%.