Hello,
we can find the required return by using the formula
Ke = Rf + B (Rm - Rf), where Rf is risk free rate of return, B is beta, Rm is the market rate of return or average return.
Required return on riskier stock = 5 + 2 (10-5) = 15%
Required return on less risky stock = 5 + 0.45 (10-5) = 7.5%
Therefore the difference between riskier stock and less risky stock is 15% - 7.5% = 7.5%.
Thankyou.
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