A Firm Has 1,000,000 Shares of Common Stock Outstanding, Each

Multiple Choice

A firm has 1,000,000 shares of common stock outstanding, each with a market price of $10.00 per share. It has 15,000 bonds outstanding, each selling for $900 (with a face value of $1,000) . The bonds mature in 15 years, have a coupon rate of 10%, and pay coupons semi-annually. The firm's equity has a beta of 1.5, and the expected market return is 20%. The tax rate is 35% and the WACC is 16%. What is the risk-free rate?

A) 4.8%
B) 11.4%
C) 27.6%
D) 30.0%