1. 18. Reward-to-risk ratios [LO 13.4] Share Y has a beta of 1.2 and an expected return...

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1. 18.

Reward-to-risk ratios [LO 13.4] Share Y has a beta of 1.2 and an expected return of 11.1 per cent. Share Z has a beta of 0.80 and an expected return of 7.85 per cent. If the risk-free rate is 2.4 per cent and the market risk premium is 7.2 per cent, are these shares correctly priced?

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