In a competitive market the reward to risk ratio can be expressed as: A) [E(R_A)- R_f]/ß_a [E(R_B)- R_f]/ß_b B) [E(R_{A )}- R_f]/ß_a = [E(R_B)- R_f]/ß_b C) [E(R_A)- R_f] = ß_a D) E(R_A) = E(R_b) E) E(R_A)- E(R_B) = R_f

Question

In a competitive market the reward to risk ratio can be expressed as: A) [E(R_A)- R_f]/ß_a> [E(R_B)- R_f]/ß_b B) [E(R_{A )}- R_f]/ß_a = [E(R_B)- R_f]/ß_b C) [E(R_A)- R_f] = ß_a D) E(R_A) = E(R_b) E) E(R_A)- E(R_B) = R_f

Quizplus · Accepted Answer

In a competitive market, the reward to risk ratio for different investments should be equal when adjusted for risk, which is what choice B represents. This equality ensures that no arbitrage opportunities exist, as all assets are fairly priced according to their risk.

In a Competitive Market the Reward to Risk Ratio Can