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CAPM Stock Y has a beta of 1.5 and an expected return of 15.7%. Stock Z has a beta of 0.6 and an expected return

CAPM

Stock Y has a beta of 1.5 and an expected return of 15.7%. Stock Z has a beta of 0.6 and an expected return of 8.2%. Currently, the risk-free risk is 5.3% and the market risk premium is 6.3%.

1) What are the reward-to-risk ratios for Stocks Y and Z, respectively?

2) Are Stock Y and Stock Z fairly priced, over-valued, or under-valued? (Please show all calculations.)

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