Which one of the following statements is correct?
A)A portfolio that contains at least 30 diverse individual securities will have a beta of 1.0.
B)Any portfolio that is correctly valued will have a beta of 1.0.
C)A portfolio that has a beta of 1.12 will lie to the left of the market portfolio on a security market line graph.
D)A risk-free security plots at the origin on a security market line graph.
E)An underpriced security will plot above the security market line.

Question

Quizplus · Accepted Answer

An underpriced security will plot above the security market line because it offers a higher expected return for its level of risk compared to what the market requires.

Which One of the Following Statements Is Correct