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Calculating Expected Return Using CAPM
Understanding the CAPM formula:

Ra = Expected return of the asset
Rf = Risk-free rate
Ba = Beta of the asset
Rm = Expected return of the market
Formula:

Ra = Rf + Ba * (Rm - Rf)
Given values:

Ba = 1.2
Rm = 10%
Rf = 3%
Calculation:

Ra = 3% + 1.2 * (10% - 3%)
Ra = 3% + 1.2 * 7%
Ra = 3% + 8.4%
Ra = 11.4%
Therefore, the expected return of the stock is 11.4%.

This means that based on its beta and the given market conditions, the stock is expected to yield a return of 11.4%.

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