The Reward-To-Risk Ratio for Stock a Is Less Than the Reward-To-Risk

question 30

Multiple Choice

The reward-to-risk ratio for stock A is less than the reward-to-risk ratio of stock B.Stock A has a beta of 0.82 and stock B has a beta of 1.29.This information implies that:

• A) stock A is riskier than stock B and both stocks are fairly priced.
• B) stock A is less risky than stock B and both stocks are fairly priced.
• C) either stock A is underpriced or stock B is overpriced or both.
• D) either stock A is overpriced or stock B is underpriced or both.
• E) both stock A and stock B are correctly priced since stock A is riskier than stock B.

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