Which one of the following describes a portfolio that plots above the security market line? a....

Which one of the following describes a portfolio that plots above the security market line?

a. The security's beta must equal 1.0.

b. The security's beta must be greater than 1.0.

c. The security is overvalued in the marketplace.

d. The risk premium of the security is less than expected given the security's beta

e. The security's return is too high.

Solutions

Expert Solution

Option E is correct

The security's return is too high

If stock is above SML line it means it is undervalued and expected return is too high

jeff jeffy answered 2 years ago

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