Stocks X, Y and Z have reward-to-risk ratios of 6.4, 6.9 and 7.3, respectively. Given an efficient market, you know that:
A) Stock X is preferred to Stock Y
B) Stock Z has a higher beta than Stock X
C) The market risk premium is greater than 6.4, but less than 7.3
D) Stock Y is riskier than Stock X
E) At least two of the securities are mis-priced

Question

Quizplus · Accepted Answer

The Answer of Stocks X, Y and Z have reward-to-risk ratios of 6.4, 6.9 and 7.3, respectively. Given an efficient market, you know that:
A) Stock X is preferred to Stock Y
B) Stock Z has a higher beta than Stock X
C) The market risk premium is greater than 6.4, but less than 7.3
D) Stock Y is riskier than Stock X
E) At least two of the securities are mis-priced

Stocks X, Y and Z Have Reward-To-Risk Ratios of 6