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The Capital Asset Pricing Model CAPM computes the expected return on a security by adding the risk free rate of return to the incremental yield of the expected market return which is adjusted by the

The Capital Asset Pricing Model (CAPM) computes the expected return on a security by adding the risk-free rate of return to the incremental yield of the expected market return which is adjusted by the company's beta. What is MNO's expected rate of return if the equity market is expected to earn 12 percent; the treasury bonds are currently yielding 5 percent. The beta coefficient for MNO is estimated to be 0.60. MNO is subject to an effective corporate income tax rate of 40 percent.
A. 12.00 percent         C. 9.20 percent
B. 12.20 percent         D. 7.20 percent

Jun 20 2021 View more View Less

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