use capital asset pricing model to predict the return next year stock, return holding stocks to be 12% on average, the interest rate on 3 month t-bills will be 2%. calculate a stock with a beta of -0.3, 0.7, and 1.6. show three separate calculations

To predict the return of a stock using the Capital Asset Pricing Model (CAPM), you will need the following information:

1. The risk-free rate: This is the interest rate on a risk-free investment, typically represented by the yield on 3-month Treasury bills (T-bills). In this case, the risk-free rate is given as 2%.

2. The market return: This refers to the average return on the overall market. However, in your question, you mentioned the return holding stocks to be 12% on average. So we can assume this as the market return.

3. Beta: Beta measures the sensitivity of a stock's returns to the overall market's returns. A beta of 1 indicates that the stock's returns move in line with the market, while a beta less than 1 indicates less sensitivity and a beta greater than 1 indicates greater sensitivity.

Now let's calculate the expected return for each stock with different betas:

Calculation 1: Stock with Beta -0.3
Expected return = Risk-free rate + Beta * (Market return - Risk-free rate)
Expected return = 2% + (-0.3) * (12% - 2%)
Expected return = 2% + (-0.3) * 10%
Expected return = 2% - 3%
Expected return = -1%

Calculation 2: Stock with Beta 0.7
Expected return = Risk-free rate + Beta * (Market return - Risk-free rate)
Expected return = 2% + 0.7 * (12% - 2%)
Expected return = 2% + 0.7 * 10%
Expected return = 2% + 7%
Expected return = 9%

Calculation 3: Stock with Beta 1.6
Expected return = Risk-free rate + Beta * (Market return - Risk-free rate)
Expected return = 2% + 1.6 * (12% - 2%)
Expected return = 2% + 1.6 * 10%
Expected return = 2% + 16%
Expected return = 18%

Therefore, the expected returns for stocks with betas of -0.3, 0.7, and 1.6 are calculated to be -1%, 9%, and 18%, respectively, using the Capital Asset Pricing Model.