Your Personal Opinion Is That a Security Has an Expected

Multiple Choice

Your personal opinion is that a security has an expected rate of return of 0.11. It has a beta of 1.5. The risk-free rate is 0.05 and the market expected rate of return is 0.09. According to the Capital Asset Pricing Model, this
Security is

A) underpriced.
B) overpriced.
C) fairly priced.
D) Cannot be determined from data provideD.11% = 5% + 1.5(9% - 5%) = 11.0%; therefore, the security is fairly priced.