Question
Stock Y has a beta of 1.4 and an expected return of 17 percent. Stock Z has a beta of .7 and an expected return
Stock Y has a beta of 1.4 and an expected return of 17 percent. Stock Z has a beta of .7 and an expected return of 10.1 percent. If the risk-free rate is 6 percent and the market risk premium is 7.2 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 undervalue/overvalue and Stock Z is undervalue/overvalue . (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)
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