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. This information implies that: Both stock A and stock B are correctly priced since stock A is riskier than stock B. Stock A is less risky than stock B and both stocks are fairly priced. Either stock A is overpriced or stock B is under priced or both. Stock A is riskier than stock B and both stocks are fairly priced. Either stock A is under priced or stock B is overpriced or both.

Answer rating: 100% (QA)

Either stock A is overpriced or stock ... View the full answer