Asked by Logan perry on Jul 06, 2024
Verified
A security that is fairly priced will have a return that lies _____ the Security Market Line.
A) Below.
B) On or below.
C) On.
D) On or above.
E) Above.
Security Market Line
A line that represents the relationship between the risk of an investment and its expected return, used in the Capital Asset Pricing Model.
Fairly Priced
A term used to denote that an asset's market price is considered reasonable based on its earnings and growth prospects.
- Understand the concept of the Security Market Line and its implications for security pricing.
Verified Answer
MR
Maria RolonJul 10, 2024
Final Answer :
C
Explanation :
A security that is fairly priced according to the Capital Asset Pricing Model (CAPM) will have an expected return that lies on the Security Market Line (SML). The SML represents the expected return of a security based on its systematic risk (beta).
Learning Objectives
- Understand the concept of the Security Market Line and its implications for security pricing.