The reward-to-risk ratio can be deﬁned as the:
A) Risk premium minus the risk-free rate of return.
B) Market risk premium divided by the beta of a risky stock.
C) Slope of the security market line.
D) Beta of a risky stock.
E) Market risk premium minus the risk free rate of return divided by a stock's beta.

Question

Quizplus · Accepted Answer

The reward-to-risk ratio is defined as the slope of the security market line, which represents the relationship between the expected return of a security and its beta.

The Reward-To-Risk Ratio Can Be Deﬁned as The