Stocks D, E, and F have actual reward-to-risk ratios of 7.1, 6.8, and 7.4, respectively. Given this, you know for certain that:
A)Stock E is preferable to Stock F.
B)Stock D has a higher beta than Stock F.
C)the market risk premium is greater than 6.8 and less than 7.4.
D)Stock F is riskier than Stock D.
E)at least two of the securities are mispriced.

Question

Quizplus · Accepted Answer

The reward-to-risk ratios differ among the stocks, indicating that at least two of them are mispriced relative to each other.

Stocks D, E, and F Have Actual Reward-To-Risk Ratios of 7.1