Beale Manufacturing Company has a beta of 1.7, and Foley Industries has a beta of 0.35. The required return on an index fund that holds the entire stock market is 9.5%. The risk-free rate of interest is 5.5%. By how much does Beale's required return exceed Foley's required return? Do not round intermediate calculations. Round your answer to two decimal places.
Required return=risk free rate+beta*(market rate-risk free rate)
Required return for:
Beale=5.5+(9.5-5.5)*1.7=12.3%
Foley=5.5+(9.5-5.5)*0.35=6.9%
Hence excess return=12.3-6.9
=5.4%
Beale Manufacturing Company has a beta of 1.7, and Foley Industries has a beta of 0.35....
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