Limit elastic analysis of a functionally graded (FG) rotating disk with material grading based on modified rule of mixture (MROM) is reported in the present study. In MROM, stress to strain transfer ratio (q) is an unknown parameter which restricts the application of MROM as yield strength estimation of a material depends on this ratio. Till now the determination of stress to strain transfer ratio, which varies with size, shape, manufacturing processes and composition, is reported by means of experiments. In current work, the effective Young's modulus is calculated by two means i.e. MROM and Halpin-Tsai. Later stress to strain transfer ratio is quantified using MROM using inverse approach and then effective yield stress variation of FGM has been calculated. Different combinations of metal matrix ceramic reinforced FG material were selected. Metals having high strength to weight ratio were combined with non-oxide ceramics of low density. Variational formulation method has been employed to solve the elasticity problem of the rotating disk taking radial displacement field as unknown variable and best material combination is proposed on the basis of maximum limit elastic speed obtained.