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Reward to Risk Ratios: Y Ltd shares have a beta of 1.2 and an expected return of 11.4% Shares in Z Ltd have a beta

Reward to Risk Ratios: Y Ltd shares have a beta of 1.2 and an expected return of 11.4%

Shares in Z Ltd have a beta of 0.80 and an expected return of 8%. If the risk free rate is 2.5% and the market risk premium is 7%, are these shares correctly priced.

Reward to Risk Ratios: In the previous problem, what would the risk free rate have to be for two shares to be correctly priced relative to each other.

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