a.required return=risk-free rate +Beta*(market rate- risk-free rate)
required return for:
R=4+(9-4)*2.5=16.5%
S=4+(9-4)*0.55=6.75%
Hence difference=16.5%-6.75%
=9.75%
b.Required return for:
Beale=5.5+(11-5.5)*1.4=13.2%
Foley=5.5+(11-5.5)*0.7=9.35%
Hence difference=13.2%-9.35%
=3.85%
8.9/8.10 Stock R has a beta of 2.5, Stock S has a beta of 0.55, the...
1:Stock R has a beta of 2.5, Stock S has a beta of 0.95, the required return on an average stock is 11%, and the risk-free rate of return is 3%. By how much does the required return on the riskier stock exceed the required return on the less risky stock? Round your answer to two decimal places. % 2:Beale Manufacturing Company has a beta of 2, and Foley Industries has a beta of 0.35. The required return on an...
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