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%
Answer: C
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