# Finance

posted by
**Bob** on
.

Suppose you are considering two investments, stock A and stock B. The beta of A is 1.20, and the beta of B is 0.80. Stock A has an expected return of 12% and Treasury Bills are yielding 3%.

If the two stocks are fairly prices, what's the expected return on the Market Index?

Someone said the answer was:

(.12-.03)/1.2)+.03 = .105

Can someone please explain why??