Question 22
A stock has a beta of 1.5. The risk-free rate is 3.5%, and the expected return on the market is 12%. However, due to market uncertainty, the expected return on the market might decrease by 2 percentage points. If the market return decreases as expected, what will be the revised expected return of the stock as per the CAPM formula? Express your answer as a percentage e.g. 6.25% should be written as 6.25