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Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of .7 and an expected return
Stock Y has a beta of 1.2 and an expected return of 14.5 percent. Stock Z has a beta of .7 and an expected return of 9.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 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 overvalued / undervalued and Stock Z is undervalued / overvalued.
I got 7.42 for Y and 5.29 for Z. How do I get the SML reward-to-risk ?
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