Question: In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on

In a recent closely contested lawsuit, Apex sued Bpex for patent infringement. The jury came back today with its decision. The rate of return on Apex was rA = 3.1%. The rate of return on Bpex was only rB = 2.5%. The market today responded to very encouraging news about the unemployment rate, and rM = 3%. The historical relationship between returns on these and the market has been estimated from index model regressions as:
Apex: rA = .2% + 1.4rM
Bpex: rB = –.1% + .6rM
On the basis of these data, which company do you think won the lawsuit?

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