Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a

Question

Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a beta of 0.8 and an expected return of 9.4 percent. If the risk-free rate is 5.1 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y and Z are ______and _______ percent, respectively. Since the SML reward-to-risk is _______ percent. Stock Y is (overvalued or undervalued) Stock Z is (Overvalued or undervalued)

Stock Y has a beta of 1.6 and an expected return of 16.6 percent. Stock Z has a beta of 0.8 and an expected return of 9.4 percent. If the risk-free rate is 5.1 percent and the market risk premium is 6.6 percent, the reward-to-risk ratios for stocks Y and Z are ______and _______ percent, respectively. Since the SML reward-to-risk is _______ percent. Stock Y is (overvalued or undervalued) Stock Z is (Overvalued or undervalued)

Explanation / Answer

Answer;

Reward to Risk ratio = (Expected return

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