Stock A has a required return of 19%. Stock B has a required return of 11%. Assume a risk-free rate of 4.75%. By how much does Stock A's risk premium exceed the risk premium of Stock B?
A) 3.25%
B) 6.25%
C) 8.00%
D) 7.00%

Question

Quizplus · Accepted Answer

The risk premium of Stock A is 19% - 4.75% = 14.25%. 
The risk premium of Stock B is 11% - 4.75% = 6.25%. 
The difference between the two risk premiums is 14.25% - 6.25% = 8.00%. Therefore, the answer is C.

Stock a Has a Required Return of 19