1.You estimate that Walmart\'s reward-to-risk ratio is less than the reward-to-r

Question

1.You estimate that Walmart's reward-to-risk ratio is less than the reward-to-risk ratio of Target. If Walmart has a beta of 0.77 and Target has a beta of 1.38, you would conclude that:

Walmart is less risky than Target and both stocks are fairly priced.

1.You estimate that Walmart's reward-to-risk ratio is less than the reward-to-risk ratio of Target. If Walmart has a beta of 0.77 and Target has a beta of 1.38, you would conclude that:

Walmart is less risky than Target and both stocks are fairly priced.

Explanation / Answer

Either Walmart is overpriced or Target is underpriced or both.
Beta is measure of systematic risk and reward - to- risk ratio the reward of bearing risk increases as amount of beta increases.

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