If a Security Plots Below the Security Market Line, It

question 106

Multiple Choice

If a security plots below the security market line, it is:

• A) ignoring all of the security's unique risk.
• B) underpriced, a situation that should be temporary.
• C) offering too little return to justify its risk.
• D)a defensive security, which expects to offer lower returns.

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Definitions:

Return On Common Stockholders' Equity

A measure of financial performance that indicates how much net income a company generates with the money shareholders have invested.

Earnings Per Share

A financial measure that calculates the portion of a company’s profit allocated to each outstanding share of common stock, indicating profitability.

Discontinued Operations

Components of a business that have been sold or discontinued, reported separately from continuing operations in financial statements.

Asset Turnover Ratio

A financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue.