Your personal opinion is that a security has an expected rate of return of 0.11. It has a beta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. According to the Capital Asset Pricing Model, this
Security is
A) underpriced.
B) overpriced.
C) fairly priced.
D) Cannot be determined from data provideD.11% = 5% + 1.5(9% - 5%) = 11.0%; therefore, the security is fairly priced.

Question

Quizplus · Accepted Answer

Using the Capital Asset Pricing Model, we can calculate the expected rate of return of the security to be the same as the personal opinion, which is 11%. This means that the security is fairly priced.

Your Personal Opinion Is That a Security Has an Expected