You have analyzed the following four securities and have estimated each security's beta and what you expect each security to return next year. The expected return on the market portfolio is 12%, and the relevant risk-free rate is 5%.
-Refer to the information above. Based on your analysis, which of the securities is correctly priced?
A)Security A
B)Security B
C)Security D
D)Security C

Question

You have analyzed the following four securities and have estimated each security's beta and what you expect each security to return next year. The expected return on the market portfolio is 12%, and the relevant risk-free rate is 5%. 
-Refer to the information above. Based on your analysis, which of the securities is correctly priced?
A)Security A 
B)Security B 
C)Security D 
D)Security C

Quizplus · Accepted Answer

Security A is correctly priced because its price is equal to its intrinsic value.

You Have Analyzed the Following Four Securities and Have Estimated