I m nt currently taking help of book to answer ur quest. but what i understood is that there may be a circumstances when Expected Return = Req. Return, therefore whether Expected Return or Required Return is used, it does’nt matter.
Now, Expected Return is the Return that Investor is expecting to receive by holding a particular Assets whereas Req. Return is the minimum Return that an investor demand for holding a particular assets instead of holding other assets with similar risk.
As we know that Price & Returns are inversly related means to say that if Return is higher, price of the assets must be low enough to compensate for higher return. For e.g. An asset has price = 80 and an investor expects the price to be 100 in one year assuming no other cash flows like dividends..etc.
Therefore Expected Return = (100-80)/80 = 25%.
while from the data, you calculated required return with the help of CAPM = 20%
Now Minimum Return Required by an Investor for holding the asset is only 20% in the market but he expects that the same asset will pay off 25%, its his ( Investor ) expectation, so it seems to be a good deal bcz asset is undervalued .i.e price is low, Expected Return is higher, buy it. Therefore we may say that Expected Return = Req. Return + some extra return ( you may view this as alpha ).
If Calculated Required return with the help of CAPM is 25% in that case whether it is Req. Return or Expectd Return is used, it does not matter.
This is what I understood, if something more or I am missing something please comment on the same so that i can also enhance my skill on Return Concepts. Thanks in Advance.