1. Company A has a beta of 0.70, while Company B's beta is 0.80. 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.)
Use the CAPM to calculate the rate of return on the two securities
Rate of ...
The solution explains how to calculate the difference in required rate of return for two stocks.