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Company A has a beta of 0.70, while Company B's beta is 1.10. The required return on the stock market is 11.00%, and the risk-free
Company A has a beta of 0.70, while Company B's beta is 1.10. 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.) Select the correct answer.
a. 2.50%
b. 2.55%
c. 2.60%
d. 2.65%
e. 2.70%
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