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The market risk premium for next period is 6.70% and the risk-free rate is 3.10%. Stock...

The market risk premium for next period is 6.70% and the risk-free rate is 3.10%. Stock Z has a beta of 0.74 and an expected return of 11.40%. What is the:

a) Market's reward-to-risk ratio?

b) Stock Z's reward-to-risk ratio

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Answer #1

Rewards to Risk is calculated by _ _ _ _(Tremors Ratio)

i)

Market Return to Risk Ratio = = 3.6 _ _ _ (Beta of Market is always 1)

ii)

Stock Z Return to Risk Ratio = = 10.73

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