Semitool Corp. has an expected excess return of 6% for next year. However, for every unexpected 1% change in the market, Semitool's return responds by a factor of 1.2. Suppose it turns out that the economy and the stock market do better than expected by 1.5% and Semitool's products experience more rapid growth than anticipated, pushing up the stock price by another 1%. Based on this information, what was Semitool's actual excess return?
A) 7%
B) 8.5%
C) 8.8%
D) 9.25%

Question

Quizplus · Accepted Answer

6% + (1.5%)(1.2) + 1% = 8.8%