If markets are efficient and in equilibrium:
A) all securities would lie on the SML.
B) any security that plots below the SML would be considered undervalued.
C) any security that plots above the SML would be considered overvalued.
D) no security would lie on the SML.

Question

Quizplus · Accepted Answer

In an efficient market, all securities are correctly priced and would lie on the Security Market Line (SML), reflecting their appropriate risk-return tradeoff.

If Markets Are Efficient and in Equilibrium