Solved: What is the expected return on the stock, Finance Basics

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What is the expected return on the stock

Problem:

Using the CAPM equation, if the risk free rate is 1% per annum, the market risk premium is 4% and a stocks beta is 1.1, what is the expected return on the stock? If the stock is suddenly seen as less risky and it moves one to one with the market (ie its beta=1) what would be the required return?

Please provide clear workings and commentary for the above (simple English please).

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Finance Basics: What is the expected return on the stock

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Finance Basics: What is the expected return on the stock

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