Altria Group Inc. (ticker: MO on NYSE) is an American manufacturer of

Altria Group Inc. (ticker: MO on NYSE) is an American manufacturer of tobacco products. Selected Financial information for Altria is provided in the table below. What is the expected return on shares of Altria using the SML?

Asset Expected Return Beta
Altria 0.5
Risk Free Asset 5% 0
Market Portfolio 10% 1

A) 5.0%
B) 7.5%
C) 10.0%
D) 12.5%
E) 15%

ANSWER

B