Hocking Manufacturing Company Has a Beta of 0

question 99

Multiple Choice

Hocking Manufacturing Company has a beta of 0.65,while Levine Industries has a beta of 1.40.The required return on the stock market is 11.00%,and the risk-free rate is 4.25%.What is the difference between Hocking's and Levine's required rates of return? (Hint: First find the market risk premium,then find the required returns on the stocks.)

• A)4.34%
• B)4.57%
• C)4.81%
• D)5.06%

---

Definitions:

Government Intervention

Actions taken by a government to affect or control various aspects of the economy, such as regulations, subsidies, tariffs, and taxes to correct market failures and promote economic stability.

Regulatory Capture

A situation where regulatory agencies are dominated by the industries they are supposed to be regulating, leading to decision making that benefits the industry at the expense of the public good.

Economic Efficiency

A situation in which it is not possible to improve overall economic welfare by reallocating resources amongst individuals, implying no waste is occurring.

Deregulated Industry

An industry where government restrictions on business operations, such as price controls and market entry, have been reduced or eliminated.