Assume that CAPM holds and that the market rate of return is 12% and the riskless rate is 4%. Moon Corp.s stock has higher systematic risk compared to the market portfolio and has risk premium of 5.5%. Based on this information, Moon Corp.s stock ___________.

1. A) is underpriced.

2. B) is correctly priced.

3. C) will plot above the security market line.

4. D) is overpriced.

5. E) has a beta below one.