A stock has a volatility (σi) of 40% and its correlation with the market is 0.6. If the market portfolio has a volatility of 20% and an expected return of 12%, and the risk-free rate is 4%, what is the stock's expected return according to the CAPM? E[Ri] = ___% (answer with one decimal, e.g., 12.3, no % sign)

A stock has a volatility (σi) of 40% and its correlation with the market is 0.6. If the market portfolio has a volatility of 20% and an expected return of 12%, and the risk-free rate is 4%, what is the stock's expected return according to the CAPM? E[Ri] = ___% (answer with one decimal, e.g., 12.3, no % sign)

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

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