Siebling Manufacturing Company's common stock 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 stock?
A) 7.8%
B) 13.4%
C) 14.4%
D) 8.4%

Question

Quizplus · Accepted Answer

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

Siebling Manufacturing Company's Common Stock Has a Beta of