Company a Has a Beta of 0

question 19

Multiple Choice

Company A has a beta of 0.70,while Company B's beta is 1.45.The required return on the stock market is 11.00%,and the risk-free rate is 2.25%.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. ) Do not round your intermediate calculations.

• A) 5.06%
• B) 5.01%
• C) 4.71%
• D) 4.30%
• E) 4.25%

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Definitions:

Subclasses

Categories that fall under a larger class, often sharing many characteristics with the class but having distinctive features.

Reversible Thinking

The ability to recognize that actions or processes can be undone, leading to the original state or condition.

Centration

A cognitive limitation in early childhood, where a child focuses on one aspect of a situation or object and ignores others.

Formal Operations

The final stage in Piaget's theory of cognitive development, characterized by the ability to think abstractly, reason logically, and manage hypothetical situations.