Problem 13-18 Reward-to-Risk Ratios [LO4]

Problem 13-18 Reward-to-Risk Ratios [L04] Stock Y has a beta of 1.8 and an expected return of 18.3 percent. Stock Z has a beta of 1 and an expected return of 11.3 percent. If the risk-free rate is 5.6 percent and the market risk premium is 6.6 percent, the reward-to-risk 1.5/2.5 points awarded Scored eBook Hint Print References ratios for Stocks Y and Z are the SML reward-to-risk is 5.72 0 and 12.20 percent, respectively. Since 6 60 e percent, Stock Y is undervalued and Stock Z is overvalued (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.)