A stock with an actual return that lies above the security market line has
A)less systematic risk than the overall market.
B)more risk than warranted based on the realized rate of return.
C)yielded a return equivalent to the level of risk assumed.
D)more systematic risk than the overall market.
E)yielded a higher return than expected for the level of risk assumed.

Question

Quizplus · Accepted Answer

A stock with an actual return that lies above the security market line has yielded a higher return than expected for the level of risk assumed. This means that the stock has outperformed the market and given a higher return than what would usually be expected for its level of risk. It does not necessarily indicate lower or higher systematic risk than the overall market.

A Stock with an Actual Return That Lies Above the Security