The expected return on the market is 8% and the risk free rate is 3%.A stock has an expected return of 6.75% and a beta of 0.75.Where does the stock plot relative to the SML?
A) Below the SML
B) On the SML
C) Above the SML

Question

Quizplus · Accepted Answer

Treynor Index = 11ea7fdb_fc0d_f579_a768_67a7dbb6af72_TB2902_11 Treynor Index for the market = 11ea7fdb_fc0d_f57a_a768_07fabd147b8a_TB2902_11 = 0.05 or 5%
Treynor Index for the stock = 11ea7fdb_fc0d_f57b_a768_6baf7362af8d_TB2902_11 = 0.05 or 5%
Since Treynor indexes are equal, stock plots on the SML.

The Expected Return on the Market Is 8% and the Risk