According to CAPM:
Expected return of stock = Risk-free rate + beta (Market risk - Risk-free rate)
E[r] = 9% + 0.91(11%-9%) = 10.82%

Explanation: The Capital Asset Pricing Model (CAPM) formula is used to calculate the expected return of a stock:

E[r] = Rf + β(Rm - Rf)

Where:

• Rf = Risk-free rate = 9% = 0.09
• Rm = Expected market return = 11% = 0.11
• β = Beta = 0.91

Plugging in the values: E[r] = 0.09 + 0.91(0.11 - 0.09) E[r] = 0.09 + 0.91(0.02) E[r] = 0.09 + 0.0182 E[r] = 0.1082 = 10.82%

This represents the required return on the stock given its systematic risk (beta) relative to the market.