Olson Corporation Has a Beta Coefficient of 1

question 13

Multiple Choice

Olson Corporation has a beta coefficient of 1.5 at a debt/assets ratio equal to 40 percent. The risk-free rate of return, rRF, is 5 percent and the market return, rM, is 9 percent. Based on the capital asset pricing model (CAPM) , what is Olson's required rate of return on its common equity?

• A)18.5%
• B)13.5%
• C)11.0%
• D)15.0%
• E)6.0%

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