Siebling Manufacturing Company's common stock has a beta of .8.If the expected risk-free return is 7% and the market offers a premium of 8% over the risk-free rate,what is the expected return on Siebling's common stock?
A)7.8%
B)13.4%
C)14.4%
D)8.7%

Question

Quizplus · Accepted Answer

The expected return on Siebling's common stock can be calculated using the Capital Asset Pricing Model (CAPM): Expected Return = Risk-Free Rate + Beta * Market Risk Premium. Here, it is 7% + 0.8 * 8% = 13.4%.

Siebling Manufacturing Company's Common Stock Has a Beta of