Beale Manufacturing Company has a beta of 1.1, andFoley Industries has a beta of 0.30. The required return on an index fund that holds theentire stock market is 11%. The risk-free rate of interest is 4.5%. By how much does Beale’srequired return exceed Foley’s required return?

Beale Manufacturing Company has a beta of 1.1, andFoley Industries has a beta of 0.30. The required return on an index fund that holds theentire stock market is 11%. The risk-free rate of interest is 4.5%. By how much does Beale’srequired return exceed Foley’s required return?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter2: Risk And Return: Part I

Section: Chapter Questions

Problem 12P: Stock R has a beta of 1.5, Stock S has a beta of 0.75, the expected rate of return on an average...

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Question

Beale Manufacturing Company has a beta of 1.1, and
Foley Industries has a beta of 0.30. The required return on an index fund that holds the
entire stock market is 11%. The risk-free rate of interest is 4.5%. By how much does Beale’s
required return exceed Foley’s required return?

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