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

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.