Using CAPM A stock has a beta of125 the expected return on the market is 14percent andthe risk-free rate is 52 percent What must the expected return onthis stockbe

The expected return on the stock can be calculated using the Capital Asset Pricing Model (CAPM) as follows:

Expected return on stock = Risk-free rate + Beta x (Expected return on market - Risk-free rate)

Expected return on stock = 5.2% + 1.25 x (14% - 5.2%)

Expected return on stock = 5.2% + 1.25 x 8.8%

Expected return on stock = 5.2% + 11%

Expected return on stock = 16.2%

Therefore, the expected return on this stock is 16.2%.