# How does beta affect a companies required rate of return?

Company A has a beta of 0.70, while Company B's beta is 1.30. 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.)

4.74%

4.05%

3.77%

4.94%

4.70%

https://brainmass.com/business/beta-and-required-return-of-a-project/affect-companies-required-rate-return-307750

#### Solution Preview

We use the CAPM equation to calculate the return on the two stocks and then ...

#### Solution Summary

The solution explains how to calculate the difference in the required rate of return for two stocks.

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