Question

roblem 13-18 Reward-to-Risk Ratios (L04) STOCK Y has a beta of 14 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 72 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 and Stock Z is (Do not round Intermediate calculations and enter your answers as a percent rounded to 2 decimal places, ... 32.10

Answer 1

Risk to reward ratio of Y = 7.85
Risk to reward ratio of Z = 5.85
Risk to reward ratio of market = 1.2

R - RE Treynor Ratio - (IR) Reward to Rest Ratio ß represents systematic Risk Macket 1 (Market has a Beta of 1) 104 0.7 B 10.1% 7.24. Returns (p) 17%. Risk free by by. 64. % rate (RA) 5.85 1.2 TR 7.85 (TR higher the better) Both 4 & Z ratio than have a better risk to reward the market. a highee Y is better than a as it has Risk to reward ratio.