Question

A stock has a beta of 1.29 and an expected return of 11.57 percent. If the...

A stock has a beta of 1.29 and an expected return of 11.57 percent. If the risk-free rate is 4.4 percent, what is the stock's reward-to-risk ratio?

7.26%

5.56%

5.13%

8.97%

4.86%

0 0
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Answer #1

Reward to risk ratio : The formula for the reward to risk ratio, is the risk premium on the stock /beta that is the risk that has to be undertaken, to earn the return.

So, the reward to risk ratio = (11.57-4.4) / 1.29

=5.558 %

= 5.56% (rounded off to two decimal places)

So, the correct option is option B

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