Reward-to-Risk Ratios Equity Y has a beta of 1.4 and an expected return of 18.5 per cent.

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Reward-to-Risk Ratios Equity Y has a beta of 1.4 and an expected return of 18.5 per cent. Equity Z has a beta of 0.80 and an expected return of 12.1 per cent. If the riskfree rate is 2 per cent and the market risk premium is 7.5 per cent, are these equities correctly priced? Explain.

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