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

5.56%

Explanation:

the reward to risk ratio of this stock is:

reward to risk = (expected return - risk free rate) / beta

reward to risk = (11.57% - 4.4%) / 1.29 = 5.56%

The reward to risk ratio shows the investors how much extra money they should expect to earn for every dollar that they invest in a certain stock due to the stock's risk. A stock with a beta of 1 only carries the market risk, but since this stock's beta is 1.29, its risk is higher.  

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