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Difference in 2 Companies' ROR

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Kamath Manufacturing Company has a beta of 1.45, while Gehr Industries has a beta of 0.85. The required return on the stock market is 12.00%, and the risk-free rate is 5.00%. What is the difference between Kamath's and Gehr's required rates of return? (Hint: first, find the market risk premium, then find required returns on the stocks.)

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Solution Summary

Brief calculations show how to find the difference in required rates of return when given two companies' betas.

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