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Reward-to-Risk Ratios Stock Y has a beta of 1.40 and an expected return of 19 percent. Stock Z has a beta of .65 and an expected return of 10.5 percent. If the risk-free rate is 6 percent and the market risk premium is 8.8 percent, are these-stocks correctly priced?

The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...

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