In: Finance
Draw the SML graph, and indicate the region where you can find the most attractive investments. Also indicate the area where the least attractive investments are located. Be sure to label the axes and other parts of the graph.
The
undervalued stocks which are above the SML line are the most
attractive stock as they will be available at cheaper price.
Whereas the overvalued stocks are the least attractive investments
as they will be available at ahigher price. And the one stock lying
on the line is an efficient stock.