The capital asset pricing model $($CAPM$)$ describes the relationship between systematic risk and

expected returns for assets. It states that the expected return on an asset is equal to the risk$-$free rate

plus a risk premium based on the asset's beta and the market risk premium.

The CAPM equation is:

E$($Ri$)=$ Rf $+\backslash$beta i $*($E$($Rm$)-$ Rf$)$

Where:

E$($Ri$)=$ Expected return on asset i

Rf $=$ Risk$-$free rate

$\backslash$beta i $=$ Beta of asset i

E$($Rm$)=$ Expected return on the market portfolio

Question: An investor is considering investing in Stock A which has a beta of $1\mathrm{.}2.$ The risk$-$free rate is

currently $3\%$ and the expected return on the market portfolio is $11\%.$

Based solely on the CAPM, what is the expected return on Stock A$?$

a$)9\mathrm{.}6\%$

b$)11\mathrm{.}4\%$

c$)13\mathrm{.}2\%$

d$)14\mathrm{.}4\%$