A security that is fairly priced will have a return that lies ________ the security market line.
A)below
B)on or below
C)on
D)on or above
E)above

Question

Quizplus · Accepted Answer

A security that is fairly priced will have a return that is equal to the expected return determined by the security market line. Therefore, the return lies on the line itself, and the correct answer is C. If the return is below the line, it would be considered undervalued, and if it is above the line, it would be considered overvalued.

A Security That Is Fairly Priced Will Have a Return