Respuesta :
12% is the expected market return, while 4% is the risk-free return. A stock with a beta of 0.25 is equally risky as the market is predicted to return 6%.
What market return is anticipated?
The expected return is the anticipated gain or loss on an investment with known historical return rates. It is calculated by dividing possible results by the likelihood that they will occur, adding the results, and then subtracting the results.
What Distinguishes Expected Return From Standard Deviation?
A portfolio can be examined using expected return and standard deviation, two statistical measurements. The average (mean) of a portfolio's potential return distribution, the expected return is the number of returns that are anticipated to be generated by a portfolio.
On the other hand, a portfolio's standard deviation measures how much the returns deviate from the mean, acting as a stand-in for the portfolio's risk.
Calculation:
The risk-free return plus beta determines the predicted return (Market rate of return - Risk-free rate of return)
= 4% + 0.25 × (12% - 4%)
= 4% + 0.25 × 8%
= 4% + 2%
= 6%
Learn more about expected market return with the help of the given link:
brainly.com/question/29359265
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