A stock has an expected return of 15 percent, its beta is 0.4, and the risk-free rate is 6.75 percent. The expected return on the market must be ?percent.

This sample give the ERM as 0.2738 but dosent give the formula. What would the formula be?

The formula to calculate the expected return on the market (ERM) is given by the Capital Asset Pricing Model (CAPM):

ERM = Risk-Free Rate + Beta x (Market Expected Return - Risk-Free Rate)

In this case, the risk-free rate is given as 6.75 percent, the stock's beta is 0.4, and the stock's expected return is 15 percent. Our goal is to calculate the expected return on the market.

ERM = 6.75% + 0.4 * (15% - 6.75%)

Simplifying the equation:

ERM = 6.75% + 0.4 * 8.25%

ERM = 6.75% + 3.3%

ERM = 10.05%

Therefore, the expected return on the market would be 10.05 percent.