The Reward-To-Risk Ratio for Stock X Exceeds That of Stock

question 79

Multiple Choice

The reward-to-risk ratio for Stock X exceeds that of Stock Y. Stock X has a beta of 1.37 and Stock Y has a beta of.98. Given this, you know for certain that:

• A) Stock X is undervalued as compared to Stock Y.
• B) Stock Y is undervalued as compared to Stock X.
• C) Stock X is overvalued and has more risk than stock Y.
• D) Stock X is undervalued and has less risk than stock Y.
• E) Stock X will plot above the security market line and Stock Y will plot below the line.

---

Definitions:

Heroin

A highly addictive opioid drug derived from morphine, often used illicitly for its euphoric effects.

Problems Associated

Issues or difficulties related to a particular subject, situation, or condition that may require attention or resolution.

Night Terrors

A sleep disorder causing feelings of panic or dread, typically occurring during non-REM sleep stages and resulting in loud screams or movements.

Cause

A reason or motivation for an action or event.