Company A has a beta of 0.70, while Company B's beta is 1.45. The required return on the stock market is 9.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.) Do not round your intermediate calculations.
A. 5.06%
B. 5.01%
C. 4.71%
D. 4.30%
E. 4.25%
Answer: A
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