In a recent closely-contested lawsuit, Amax sued Bmin for patent infringement. The jury came back today with its decision. The rate of return on Amax was rA = 3.5%. The rate of return on Bmin was rB = 3%. The market today responded to very encouraging news about the unemployment rate, and Rm = 3%. The historical relationship between returns on these stocks and the market portfolio has been estimated from market (index) model regressions as:

Amax: rA = 0.0002 + 1.5 Rm

Bmin: rB = -0.0001 + 0.6 Rm

where rA is Amaxs rate of return, rB is Bmin's rate of return and Rm is the market portfolio rate of return in the regressions. Based on these data, which company do you think won the lawsuit? Explain. (Note: On a daily basis, the rate of return on risk-free Treasury bills is close to zero.) (7 marks)