1. Stock A has an expected return of 19 percent and a beta of 1.6. Stock B has an expected return of 11 percent and a beta of 0.8. Both stocks have the same reward-to-risk ratio. What is the risk-free rate?
2.26 percent
3.00 percent
4.50 percent
1.77 percent
2. Miller Sporting Goods is acquiring Town Line Sports for $327,000 in cash. Currently, Miller Sporting Goods has 12,500 shares of stock outstanding at a market price of $54 a share. Town Line Sports has 12,000 shares outstanding at a price of $26 a share. Neither firm has any debt. The incremental value of the acquisition is estimated to be $16,500. What is the merger premium per share?