Question
Consider the CAPM. If stock XYZ plots below the security market line, which of the following statements is true? Stock XYZ is underpriced and a
Consider the CAPM. If stock XYZ plots below the security market line, which of the following statements is true?
Stock XYZ is underpriced and a trader should buy it. | ||
Stock XYZ is fairly priced. | ||
Stock XYZ is overpriced and a trader should buy it. | ||
Stock XYZ is overpriced and a trader should short sell it. |
Paul is more risk averse than Henry. According to the CAPM, which of the following statements is correct?
Paul invests 100% in the market portfolio while Henry invests 100% of his money in Tesla stock. | ||
Paul allocates a smaller fraction of his wealth to the market portfolio. | ||
Pauls optimal risky portfolio is the market portfolio while Henrys optimal risky portfolio is the risk free asset. | ||
Pauls optimal complete portfolio is on the Capital market line while Henrys optimal complete portfolio is below the Capital market line. |
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