Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 8 and an expectedreturn of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-riskratios for Stocks Y and Z arepercent, respectively. Sinceandthe SML reward-to-risk ispercent, Stock Y isand Stock Z is(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Reward to Risk Ratio= (Expected return - Risk free rate) / Beta of Stock

Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk percent, respectively. Since ratios for Stocks Y and Z are and the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 8 and an expected return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk percent, respectively. Since ratios for Stocks Y and Z are and the SML reward-to-risk is percent, Stock Y is and Stock Z is (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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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Question

Stock Y has a beta of 1.8 and an expected return of 18.2 percent. Stock Z has a beta of 8 and an expected
return of 9.6 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.7 percent, the reward-to-risk
ratios for Stocks Y and Z are
percent, respectively. Since
and
the SML reward-to-risk is
percent, Stock Y is
and Stock Z is
(Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)

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