# Answer to "expected return" question

Suppose the expected return on the market portfolio is 14.7 percent

and the risk-free rate it 4.9 percent.

Morrow Inc. stock has a beta of 1.3

Assume the capital-asset-pricing model holds.

What is the expected return on Morrow's stock?

If the risk-free decreases to 4 percent, what is the expected return on Morrow's stock?

© BrainMass Inc. brainmass.com June 3, 2020, 6:44 pm ad1c9bdddfhttps://brainmass.com/business/capital-asset-pricing-model/answer-expected-return-question-72925

#### Solution Preview

Use the CAPM equation to calculate the expected return.

Expected Return = Risk Free Rate ( Market Return - Risk Free Rate ) X ...

#### Solution Summary

The solution explains how to calculate the expected return using the CAPM equation

$2.19