Stock X has a reward-to-risk ratio of 6.2, and Stock Y has a reward-to-risk ratio is 8.1. You know:
A) Stock Y is underpriced.
B) Stock X is overpriced.
C) Stock X is a better investment.
D) Stock Y is a better investment.
E) The reward-to-risk ratio of the market is between 6.2 and 8.1.

Question

Quizplus · Accepted Answer

Stock Y has a higher reward-to-risk ratio, indicating that it offers a better return for the same level of risk compared to Stock X. Therefore, Stock Y is the better investment option between the two.

Stock X Has a Reward-To-Risk Ratio of 6