Either stock is overpriced or stock is underpriced or both

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Reference no: EM132044557

The reward-to-risk ratio for stock A is less than the reward-to-risk ratio of stock B. Stock A has a beta of 0.82 and stock B has a beta of 1.29.

Reward-to-risk ratio = (E(Ri) - Rf) / B

Why "either stock A is overpriced or stock B is underpriced or both"?

Reference no: EM132044557

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