The Market Rate of Return Is 11 Percent and the Risk-Free

Multiple Choice

The market rate of return is 11 percent and the risk-free rate of return is 3 percent.Lexant stock has 3 percent less systematic risk than the market and has an actual return of 12 percent.This stock:

A) is underpriced.
B) is correctly priced.
C) will plot below the security market line.
D) will plot on the security market line.
E) will plot to the right of the overall market on a security market line graph.