An asset that has an expected rate of return above the security market line:

A) Is overpriced.
B) Is underpriced.
C) Is less risky than the market.
D) Has a beta greater than 1.
E) Has a standard deviation equal to 0.

Question

Fizza Afzal · Accepted Answer

Final Answer : B, Explanation :  An asset with an expected rate of return above the security market line (SML) is considered underpriced according to the Capital Asset Pricing Model (CAPM). This is because the SML represents the expected return for a given level of risk (beta), and any asset above this line offers a higher return for its level of risk than what the market typically offers, indicating it is a good value or underpriced.

An asset that has an expected rate of return above the security market line:

A) Is overpriced.
B) Is underpriced.
C) Is less risky than the market.
D) Has a beta greater than 1.
E) Has a standard deviation equal to 0.

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Learning Objectives

Learning Objectives

Related questions

An asset that has an expected rate of return above the security market line:A) Is overpriced.B) Is underpriced.C) Is less risky than the market.D) Has a beta greater than 1.E) Has a standard deviation equal to 0.

Definitions

Learning Objectives

Learning Objectives

Related questions

An asset that has an expected rate of return above the security market line:

A) Is overpriced.
B) Is underpriced.
C) Is less risky than the market.
D) Has a beta greater than 1.
E) Has a standard deviation equal to 0.