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Stock Y has a beta of 0.9 and an expected return of 12.6 percent. Stock Z has a beta of .6 and an expected return
Stock Y has a beta of 0.9 and an expected return of 12.6 percent. Stock Z has a beta of .6 and an expected return of 8.9 percent. If the risk-free rate is 5.7 percent and the market risk premium is 6.7 percent, the reward-to-risk ratiosfor stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is ? (undervalued, overvalued?) and Stock Z is ? (undervalued, overvalued?)
I calculated Y to be 1.07 and Z to be 0.92
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