Chapter 13-Risk&Retum; Question 7 (of 10) 11.00 points Stock Y has a beta of 1.4

Question

Chapter 13-Risk&Retum; Question 7 (of 10) 11.00 points Stock Y has a beta of 1.4 and an expected return of 15.1 percent Stock Z has a beta of 7 and an expected return of 8.6 percent. Iif the risk-free rate is 5 percent and the market risk premium is 65 percent, the reward-to-risk ratios for stocks Y and Z are SML reward-to-risk is (Click to select) (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places,e.g., 32.16.) percent, respectively. Since the and Stock Zis and percent, Stock Y is (Cick to select) References eBook&Resources; Worksheet Leaming Objective: 13-04 The security market line and the risk-retum trade-off Difficulty: Basic Secion 13.7 The Security Market Line TOSHIBA F1 F2 F3 F4 FS F6 F1 F8 F9

Explanation / Answer

Y

Z

SML

reward to risk ratio

(expected return-risk free return)/beta

(15.1-5)/1.4

(8.6-5)/.7

(5)/1

reward to risk ratio

7.21

5.14

5

reward to risk ratio

7.21

5.14

5

Y

Z

SML

reward to risk ratio

(expected return-risk free return)/beta

(15.1-5)/1.4

(8.6-5)/.7

(5)/1

reward to risk ratio

7.21

5.14

5

reward to risk ratio

7.21

5.14

5

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