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If the risk-free rate is 50 percent and the market risk

Question: Stock Y has a beta of 1.4 and an expected return of 15.1 percent. Stock Z has a beta of .7 and an expected return of 8.6 percent. If the risk-free rate is 5.0 percent and the market risk premium is 6.5 percent, the reward-to-risk ratios for stocks Y and Z are 7.21% and 5.14 % percent, respectively. Since the SML reward-to-risk is ________ percent, Stock Y is undervalued and Stock Z is overvalued.

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Business Management: If the risk-free rate is 50 percent and the market risk

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