Olson Corporation Has a Beta Coefficient of 1

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%