The expected return on the market will be 10.38%.
Given,
Expected Stock Return = 12%
Beta = 1.3
The Risk Free Rate = 5%
Thus, we can use the capital asset pricing model to find the expected return on the market with all other numbers available.
Expected Stock Return = Risk Free Rate + Beta * ( Expected Return on Market - Risk Free Rate )
Hence,
12 = 5 + 1.3 * ( Expected Return on Market - 5 )
12 - 5 = 1.3 * Expected Return on Market - 6.5
Expected Return on Market = ( 12 - 5 + 6.5 ) / 1.3
Expected Return on Market = 10.38%
While receiving on an investment, the expected return is the amount of profit or loss an investor can anticipate. Expected returns cannot be guaranteed.
To learn more about expected return here:
https://brainly.com/question/15583215
#SPJ4
