If the Reward-To-Risk Ratio of a Security Is Greater Than

question 23

Multiple Choice

If the reward-to-risk ratio of a security is greater than that supported by the security market line,then the security:

• A)is one which compensates investors for the total risk associated with that security
• B)is one which compensates investors for unsystematic risk
• C)is under-priced in the marketplace
• D)must have a beta which is greater than 1.0
• E)must be trading in a market which is strong-form efficient

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