Suppose the expected return on the market portfolio is 13.8 percent
and the risk-free rate is 6.4 percent.  solomon Inc. stock has a beta
of 1.2.  assume the capital-asset pricing model holds.

a. What is the expected return on Solomon's stock?
b. If the risk-free rate decreases to 3.5 percent, what is the
expected return on Solomon's stock?

Expected rate of return formula :E(Rp) = risk free rate + (market
return - risk free rate) * Beta of stock
a. E(R (solomon))= 6.4+ (13.8-6.4)*1.2 = 15.28%
b. E(R (solomon))= 3.5+ (13.8-3.5)*1.2 = 15.86%