A stock has a beta of 1.29 and an expected return of 11.57 percent. If the...
A stock has a beta of 1.29 and an expected return of 11.57 percent. If the risk-free rate is 4.4 percent, what is the stock's reward-to-risk ratio?
7.26%
5.56%
5.13%
8.97%
4.86%
Homework Answers
Reward to risk ratio : The formula for the reward to risk ratio, is the risk premium on the stock /beta that is the risk that has to be undertaken, to earn the return.
So, the reward to risk ratio = (11.57-4.4) / 1.29
=5.558 %
= 5.56% (rounded off to two decimal places)
So, the correct option is option B
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