6. The security market line (SML) is a line drawn on a chart that serves as a...
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6. The security market line (SML) is a line drawn on a chart that serves as a
graphical representation of the capital asset pricing model (CAPM).
a) Explain how a financial analyst can use SML curve to identify overvalued
and undervalues assets?
b) If a market is efficient and is in equilibrium, can assets plot above or
below the SML? Explain.
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