# Expected Return

Suppose the expected return on the market portfolio is 13.8 %and the risk free rate is 6.4%. Solomon Inc. stock has a beta of 1.2. Assume the capital-asset-pricing model holds.

A. What is the expected return on Solomon's stock?

B. If the risk free rate decreases to 3.5%, what is the expected return on Solomon's stock?

https://brainmass.com/business/capital-asset-pricing-model/expected-return-53635

#### Solution Preview

The Capital Asset Pricing Model gives the expected return on a stock as per the equation below :

Expected Return on Stock = Risk Free ...

#### Solution Summary

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

$2.19