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%