Question

Stock Y has a beta of 1.4 and an expected return of 14.7 percent. Stock Z has a beta of 0.7 and an expected return of 8.7 percent. If the risk-free rate is 5.2 percent and the market risk premium is 6.2 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 undervalued or overvalued and Stock Z is undervalued or overvalued.

Answer 1

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Step-by-step explanation: