The risk-free rate and the expected market rate of return are 0.06 and 0.12, respectively. According to the capital asset pricing model (CAPM), the expected rate of return on security X with a beta of 1.2 is equal to:. A. 0.06.
B. 0.144.
C. 0.12.
D. 0.132
E. 0.18
E(R) = 6% + 1.2(12 - 6) = 13.2%

D. 0.132

Explanation:

Calculation for the expected rate of return

Expected rate of return = 6% + 1.2(12 - 6)

Expected rate of return=6%+1.2(6)

Expected rate of return =6%+7.2

Expected rate of return = 13.2%

Therefore the expected rate of return on security X with a beta of 1.2 is equal to: 13.3%

contributions made after 1986. after-tax contributions to employer plans made after 1986 are recovered pro rata with taxable amounts. the remaining $80,000 is from pre-tax contributions, employer matching dollars, and earnings on those amounts.