The expected return on stock A is 12 percent. The expected return on stock B is 8

Question:

The expected return on stock A is 12 percent. The expected return on stock B is 8 percent. Assuming CAPM holds, if the beta of stock A is higher than the beta of stock B by 0.2, what should the risk premium be?

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...