What is the expected risk- free rate of return if asset X, with a beta of 1.5, has an expected return of 20 percent, and the expected market return is 15 percent? Can please explain step by step how to solve this problem.
Expected return of Stock = risk- free rate of return + Beta*( expected market return - risk- free rate of return) 20% = risk- free rate of return + 1.5* (15% - risk- free rate of return)