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What would the risk-free rate have

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Reference no: EM132284973

Stock Y has a beta of 1.4 and an expected return of 13 percent. Stock Z has a beta of 0.85 and an expected return of 10.4 percent.

Required: What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other? (Do not round intermediate calculations. Enter your answer as a percentage rounded to 2 decimal places (e.g., 32.16).)

 Risk-free rate % 

Suggestions:

We need to set the reward-to-risk ratios of the two assets equal to each other, which is:.......(equation needed)

We then cross multiply to get:

Solving for the risk-free rate, we find:

Reference no: EM132284973

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