Reward-to-risk ratio. The Royal Seattle Investment Club has $100,000 to invest in the equity market. Frasier advocates investing the funds in KSEA Radio with a beta of 1.6 and an expected return of 17.6%. Niles advocates investing the funds in Northwest Medical with a beta of 1.1 and an expected return of 15.5%. The club is split 50/50 on the two stocks. You are the deciding vote, and you cannot pick a split of $50,000 for each stock. Before you vote, you look up the current risk-free rate (the one-year U.S. Treasury bill with a yield of 3.25%). Which stock do you select? (Select the best response.) O A. The choice is Northwest Medical based on the higher reward-to-risk ratio 8.97% O B. The choice is KSEA Radio based on the higher reward-to-risk ratio of 11.14%. OC. The choice is KSEA Radio based on the higher reward-to-risk ratio13.14%. O D. The choice is Northwest Medical based on the higher reward-to-risk ratio of 11.14%.
Reward-to-risk ratio. The Royal Seattle Investment Club has $100,000 to invest in the equity market. Frasier advocates investing the funds in KSEA Radio with a beta of 1.6 and an expected return of 17.6%. Niles advocates investing the funds in Northwest Medical with a beta of 1.1 and an expected return of 15.5%. The club is split 50/50 on the two stocks. You are the deciding vote, and you cannot pick a split of $50,000 for each stock. Before you vote, you look up the current risk-free rate (the one-year U.S. Treasury bill with a yield of 3.25%). Which stock do you select? (Select the best response.) O A. The choice is Northwest Medical based on the higher reward-to-risk ratio 8.97% O B. The choice is KSEA Radio based on the higher reward-to-risk ratio of 11.14%. OC. The choice is KSEA Radio based on the higher reward-to-risk ratio13.14%. O D. The choice is Northwest Medical based on the higher reward-to-risk ratio of 11.14%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:**Reward-to-risk ratio.** The Royal Seattle Investment Club has $100,000 to invest in the equity market. Frasier advocates investing the funds in KSEA Radio with a beta of 1.6 and an expected return of 17.6%. Niles advocates investing the funds in Northwest Medical with a beta of 1.1 and an expected return of 15.5%. The club is split 50/50 on the two stocks. You are the deciding vote, and you cannot pick a split of $50,000 for each stock. Before you vote, you look up the current risk-free rate (the one-year U.S. Treasury bill with a yield of 3.25%). Which stock do you select?
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(**Select the best response.**)
- ○ A. The choice is Northwest Medical based on the higher reward-to-risk ratio 8.97%
- ○ B. The choice is KSEA Radio based on the higher reward-to-risk ratio of 11.14%.
- ○ C. The choice is KSEA Radio based on the higher reward-to-risk ratio 13.14%.
- ● D. The choice is Northwest Medical based on the higher reward-to-risk ratio of 11.14%.
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