An overpriced security will plot
A) on the security market line.
B) below the security market line.
C) above the security market line.
D) either above or below the security market line depending on its covariance with the market.
E) either above or below the security-market line depending on its standard deviation.

Question

Quizplus · Accepted Answer

An overpriced security will plot below the security market line because it offers less return for a given level of risk compared to the expected return by the market, indicating it is not a good value at its current price.

An Overpriced Security Will Plot