Siebling Manufacturing Company's common shares has a beta of .8.If the expected risk-free return is 2% and the market offers a premium of 8% over the risk-free rate, what is the expected return on Siebling's common shares?

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Quizplus · Accepted Answer

The expected return on Siebling's common shares can be calculated using the Capital Asset Pricing Model (CAPM) formula: Expected Return = Risk-Free Rate + (Beta * Market Premium). Plugging in the values: Expected Return = 2% + (.8 * 8%) = 2% + 6.4% = 8.4%.

Siebling Manufacturing Company's Common Shares Has a Beta of