Security X Has an Expected Rate of Return of 13

question 1

Multiple Choice

Security X has an expected rate of return of 13% and a beta of 1.15. The risk-free rate is 5%, and the market expected rate of return is 15%. According to the capital asset pricing model, security X is ________.

• A) fairly priced
• B) overpriced
• C) underpriced
• D) none of these answers