If alternative A has * Ai = 10% and alternative B has * Bi = 18% per year, what is known about the rate of return on the increment between A and B if the investment required in B is (a) larger than that required for A, and (b) smaller than that required for A?
What will be an ideal response?
(a) The rate of return on the increment has to be larger than 18%.
(b) The rate of return on the increment has to be smaller than 10%.
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