problem: Kamath Manufacturing Company has a beta of 1.45, while Gehr Industries has a beta of 0.85. The required return on the stock market is 12.00%, and the risk-free rate is 5.00 percent. Estimate the difference between Kamath's and Gehr's required rates of return? [Clue: First, find out the market risk premium, then find required returns on the stocks.]
[A] 3.60%
[B] 4.20%
[C] 3.90%
[D] 3.75%