Determine whether the securities Charlie and Delta are over, under or correctly valued by the market. Expected Correlation of Standard deviation Security return returns with of returns market Charlie 18.5% 0.75 16.0% Delta 15.0% 0.75 12.0% Market Portfolio 15.0% 1.0 8.0% Government bonds are expected to yield 8% p.a. (Note: "expected return" is the return from dividend and capital gains that investors expect, given the current pricing of Charlie and Delta.)