Company a Has a Beta of 0

question 143

Multiple Choice

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%

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Definitions:

Demand Factors

Variables that influence the desire and ability of consumers to purchase goods or services, including income levels, tastes, and the price of related goods.

Willingness

The readiness or inclination to act in a certain way or to undertake certain tasks, often within the context of economic transactions or agreements.

Affordability Factors

Elements that determine or influence the capability of consumers to purchase goods and services, including income, prices, and budget constraints.

Demand Factors

Elements that influence the quantity of a product or service that consumers are willing and able to purchase, including price, income levels, and consumer preferences.