8. Based on the capital asset pricing model, a security that: A. has a beta of 1.0 should produce the risk-free rate of return. B. is over-priced will plot as a point below the security market line. C. is under-priced will plot as a point to the left of the overall market point. D. has a beta of 1.2 will plot as a point to the left of the overall market point. 9. A firm has a return on equity of 11.5% according to the dividend growth model and a return of 21.9% according to the capital asset pricing model. The market rate of return is 16.5%. What rate should the firm use as the cost of equity when computing the firm's weighted average cost of capital (WACC)? A. 12.4% because it is lower than 21.7% B. 18.7% because it is higher than 11.5% C. The arithmetic average of 11.5% and 21.9% D. The arithmetic average of 11.5%, 16.5% and 21.9%