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Percent and the market risk premium

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Reference no: EM131947874

Question: 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. If the risk-free rate is 5.0 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y and Z are 7.21%  and 5.14 % percent, respectively. Since the SML reward-to-risk is ________ percent, Stock Y is undervalued  and Stock Z is overvalued.

Reference no: EM131947874

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