- CFA Exams
- CFA Level I Exam
- Topic 9. Portfolio Management
- Learning Module 2. Portfolio Risk and Return: Part II
- Subject 6. Applications of the CAPM
CFA Practice Question
If a stock is over priced, it would plot ______.
B. on the security market line
C. below the security market line
A. above the security market line
B. on the security market line
C. below the security market line
Correct Answer: C
User Contributed Comments 1
| User | Comment |
|---|---|
| 0is4eva | Reading 79, p. 794: "Any security with an estimated rate of return that plots above the SML would be considered under-priced because it implies that you ESTIMATED you would receive a rate of return on the security that is above its REQUIRED rate of return based on its SYSTEMATIC RISK." The reverse: an overpriced stock plots below the SML since it provides less return than the required rate of return based on its systematic risk. |