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Stock Y has a beta of 1 and an expected return of 13 percent. Stock Z has a beta of .5 and an expected return
Stock Y has a beta of 1 and an expected return of 13 percent. Stock Z has a beta of .5 and an expected return of 7.8 percent. If the risk-free rate is 5.5 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y and Z are and percent, respectively. Since the SML reward-to-risk is percent, Stock Y is (Click to select)undervaluedovervalued and Stock Z is (Click to select)undervaluedovervalued. (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places (e.g., 32.16).)
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