Question

The market rate of return is 12 percent and the risk-free rate of return is 3 percent. Lexant stock has 3 percent less systematic risk than the market and has an actual return of 12 percent. This stock:______

a. Is underpriced.
b. Is correctly priced.
c. Will plot below the security market line.
d. Will plot to the right of the overall market on a security market line graph.
e. Will plot on the security market line.

Answer 1

a

Step-by-step explanation:

The market rate of return is 12 percent and the risk-free rate of return is 3 percent. Lexant stock has 3 percent less systematic risk than the market and has an actual return of 12 percent. This stock is underpriced