How does the reward-to-risk ratio of Asset A compare to that of Asset B based on their expected returns and betas?

Asset A has a reward-to-risk ratio of 7.5 percent, while Asset B has a reward-to-risk ratio of 6.67 percent. This indicates that Asset A offers a higher return per unit of systematic risk compared to Asset B.

The reward-to-risk ratio for Asset A is calculated as the risk premium (expected return minus the risk-free rate) divided by its beta. For Asset A, this is (20% - 8%) / 1.6 = 7.5%. For Asset B, the calculation is (16% - 8%) / 1.2 = 6.67%. Therefore, Asset A provides a better return for its level of risk than Asset B.