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Risk - free rate ( Rf ) Beta of the security ( beta i ) Market Return ( Rm ) Market Risk Premium (
Riskfree rate Rf Beta of the security beta i Market Return Rm Market Risk Premium RmRf CAPM return of the security Ri Actual Return of the security ERi Rewardtorisk Ratio ERi Rfbeta i Alpha
Y Positive Alpha is UNDERPRICED
Z Negative Alpha is OVERPRICED
Riskfree rate Rf Beta of the security beta i Market Return Rm SML Market Risk Premium RmRf CAPM return of the security Ri Actual Return of the security ERi Rewardtorisk Ratio ERi Rfbeta i Alpha
Y Positive Alpha is UNDERPRICED UNDERVALUED
Z Negative Alpha is OVERPRICED OVERVALUED
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