If a security plots below the security market line,it is:
A) not rewarding the investor for its unique risk.
B) underpriced, a situation that should be temporary.
C) offering too little return to justify its risk.
D) a defensive security, which expects to offer lower returns.

Question

Quizplus · Accepted Answer

The security is offering too little return to justify its risk, which means that investors are not being adequately compensated for taking on the risk associated with that security. This is indicated by the fact that the security is plotted below the security market line, which represents the expected return for a given level of risk.

If a Security Plots Below the Security Market Line,it Is