Reward-to-risk ratio. The Royal Seattle Investment Club has $100,000
to invest in the equity market. Frasier advocates investing the funds in
KSEA Radio with a beta of 1.3 and an expected return of 16%. Niles
advocates investing the funds in Northwest Medical with a beta of 1.1
and an expected return of 14%. The club is split 50/50 on the two stocks.
You are the deciding vote, and you cannot pick a split of $50,000 for each
stock. Before you vote, you look up the current risk-free rate (the oneyear
U.S. Treasury bill with a yield of 3.75%). Which stock do you select?
