Final answer:
Systematic risk is part of the Capital Allocation Line (CAL), which includes risks that are inherent to the entire market or market segment and non-diversifiable. Systematic risk itself is not specifically indicative of undervalued or overvalued assets, as those concepts are related to individual investment valuations rather than market-wide risk.
Step-by-step explanation:
You've asked about where systematic risk appears in relation to the Capital Allocation Line (CAL) and whether it represents undervalued or overvalued assets. Systematic risk, also known as market risk, is risk inherent to the entire market or a market segment. This type of risk is non-diversifiable and is represented by the market portfolio, which lies on the CAL. Therefore, it is not quite accurate to refer to systematic risk as being to the left or right of the CAL, as it is actually a component of the CAL itself. The CAL represents different levels of risk and expected return by combining the risk-free asset (usually represented by government bonds) on one end and the market portfolio on the other end.
As for the representation of undervalued or overvalued assets, systematic risk is not directly related to these concepts. Valuation of assets generally pertains to specific investments and their expected returns vs. their market price. If an asset's expected return is higher than what would be predicted by its risk level (as given by the CAPM, for example), it could be considered undervalued, and vice versa for overvalued assets. In summary, none of the answer choices you've provided (a, b, c, d) directly relate to the concept of systematic risk in the context of the CAL.