Both Portfolio Y and Portfolio Z are well diversified. The risk-free rate is 6%, the expected return on the market is 15%, and the portfolios have these characteristics:

Portfolio Expected Return Beta Y 17% 1.20 Z 14% 1.00 Which of the following best characterizes the valuations of Portfolio Y and Portfolio Z?

Portfolio Y Portfolio Z

a. Undervalued Correctly valued

b. Correctly valued Overvalued

c. Undervalued Overvalued