If a stock were overpriced, it would plot
A)above the security market line.
B)below the security market line.
C)on the security market line.
D)on the y-axis.

Question

Quizplus · Accepted Answer

The security market line represents the expected return based on the risk of the stock, so a stock that is overpriced would have a lower expected return than its risk level, causing it to plot below the security market line.

If a Stock Were Overpriced, It Would Plot