Company A's historical returns for the past three years were: 6%,15%,and 15%.Similarly,the market portfolio's returns were: 10%,10%,and 16%.According to the security market line (SML),Stock A was:A.However,one needs to know the risk-free rate to construct the SML.

Question

Quizplus · Accepted Answer

The question mentions that we need to know the risk-free rate to construct the SML. Without knowing the risk-free rate or the beta for Company A, we cannot accurately determine whether it is overpriced, underpriced or correctly priced. Therefore, we need more information.

Company A's Historical Returns for the Past Three Years Were