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Stock Albatross has a risk-premium of 8 and a beta of 1.25. Stock Herring has a risk-premium of 6.4 and a beta of 1. Based
Stock Albatross has a risk-premium of 8 and a beta of 1.25. Stock Herring has a risk-premium of 6.4 and a beta of 1. Based on these numbers, you should prefer:
We need to know the variance before we can pick between the two.
Herring because the reward-to-risk ratio is smaller.
Neither because the reward-to-risk ratio is same.
Albatross because the reward-to-risk ratio is smaller.
Albatross because we always want the stock with the highest expected return.
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