Question
AM Inc. has a beta of 1.4 and PM Inc. has a beta of 0.7. The required market return is 16% and the risk-free rate
AM Inc. has a beta of 1.4 and PM Inc. has a beta of 0.7. The required market return is 16% and the risk-free rate is 7%. After the financial crisis, the expected rate of inflation built into risk-free rate falls by 2 percentage points and the required market return falls to 12%. Other condition do not change. What will be the respective differences in the required returns for AM Inc. and PM Inc.?
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Financial management theory and practice
Authors: Eugene F. Brigham and Michael C. Ehrhardt
13th edition
1439078106, 111197375X, 9781439078105, 9781111973759, 978-1439078099
