Answer and Explanation:
B. reduces the number of available job opportunities
Answer:
Reward-to-risk ratio Y =7.54%
Reward-to-risk ratio Z = 5.43%
Since the SML reward-to-risk is 6.8%
Stock Y is Undervalued
Stock Z Overvalued
Explanation:
Calculation for the reward-to-risk ratios for stocks Y is 7.54% and Z is 5.43% respectively.
Reward-to-risk ratio Y = (15.3%-5.5%)/1.3
Reward-to-risk ratio Y =7.54%
Reward-to-risk ratio Z = (9.3%-5.5%)/0.7 =
Reward-to-risk ratio Z = 5.43%
Therefore the reward-to-risk ratios for stocks Y and Z are and percent, respectively
Since the SML reward-to-risk is 6.8%
Stock Y is undervalued while Stock Stock Z on the other hand is overvalued reason been that
Reward-to-risk ratio Y is high while the Reward-to-risk ratio is low .
Most likely the first one. That's what I would put .. hope this helped :)
