Given an expected market return of 12.0%, a beta of 0.75 for Benson In

Given an expected market return of 12.0%, a beta of 0.75 for Benson Industries, and a risk-free rate of 4.0%, what is the expected return for Benson Industries?

A) 13.0%
B) 10.0%
C) 9.0%
D) 4.0%

ANSWER

Answer: B
Explanation: B) The equation for the SML is E(ri) = rf + (rf + [E(rm) – rf] × βi)
= 4.00% + 0.75 ∗ (12.00% – 4.00%) = 10.00%.