According to CAPM, all investments plot along the security market line.

Question

Quizplus · Accepted Answer

According to the Capital Asset Pricing Model (CAPM), all investments lie on the Security Market Line (SML). The SML shows the expected return of an investment as a function of its systematic risk (beta) and the market risk premium. Under CAPM, any investment that falls above the SML is considered undervalued, while any investment that falls below the SML is overvalued.

According to CAPM, All Investments Plot Along the Security Market