Question
In 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
In 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 the followingcharacteristics:
| 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? (Select the best answer below.)
A.Portfolio Y is correctly valued and Portfolio Z is overvalued.
B.Portfolio Y is undervalued and Portfolio Z is correctly valued.
C.Portfolio Y is undervalued and Portfolio Z is overvalued.
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Behavioral Finance
Authors: Edwin Burton, Sunit N. Shah
1st Edition
111830019X, 978-1118300190
