Partridge plastic's stock has an estimated beta of 1.4, and its required return is 13%. cleaver motors' stock has a beta of 0.8, and the risk-free rate is 6%. what is the required return on cleaver motors' stock? a. 7.0% b. 10.4% c. 12.0% d. 11.0% e. 10.0%

e. 10.0%

Explanation:

Using the capital asset pricing model we have:

Required return = Rf + beta (Rm - Rf)

Where Rf = Risk free return

Rm = Market return

Beta = Beta coefficient

Provided,

Partridge Plastic Stock's information as:

Beta = 1.4

Required return = 13%

Risk free rate = 6%

Putting values in equation, we will get market rate of return

13% = 6% + 1.4 (Rm - 6%)

= Rm - 6%

5% = Rm - 6%

11% = Rm

Now putting this value in equation for information provided for Cleaver Motor's Stock

Required return = 6% + 0.8 (11% - 6%)

= 6% + 4%

= 10%

the answer is b hope you pass

answer(8,000.)