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Question
Company A has a beta of 0.70, while Company B's beta is 1.20. The required return on the stock market is 11.00%, and the risk-free rate is 4.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.)a. 2.75%
b. 2.89%
c. 3.05%
d. 3.21%
e. 3.38%
Answer
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