CFA Practice Question

There are 515 practice questions for this topic.

CFA Practice Question

An asset that is plotted above the security market line (SML) is ______.
A. overpriced
B. underpriced
C. either overpriced, correctly priced, or underpriced
Explanation: An asset that is plotted above the security market line (SML) is underpriced because the expected rate of return on the security would be higher than that dictated by the beta of the stock. Its risk is too low to justify the high return.

User Contributed Comments 2

User Comment
armanaziz Note: "above" doesn't mean "along"
Mikehuynh Above: under priced
Below: over priced
On: fairly priced
You need to log in first to add your comment.