Using the data generated in the attached picture:Plot the Security Market Line (SML) Superimpose the CAPM’s required return on the SMLIndicate which investments will plot on, above and below the SML?If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph. State of the EconomyRecessionBelow AverageAverageAbove AverageBoomMeanVarianceStandard DeviationCoefficient of VariationCovariance with MPCorrelation with Market IndexBetaCAPM Req. ReturnValuation(Overvalued/Undervalued/FairlyValued)Nature of stock(Aggressive/Defensive)Probability T-Bills0.20.10.30.30.1777777ooo의0000이기07% Return on T-Bills, Stocks and Market IndexPhillipsPay-up-22-220355016.95.523.40.320.040.99531.3217.542814.70-10-202.072.415.61.18-0.03-0.9953-0.88-0.02Rubber-made Market Index-1310-107453019.63.618.90.180.020.68940.7412.891152943153.117.70.210.03Defensive1115Overvalued Undervalued Undervalued Fairly pricedAggressive Defensive Defensive

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Plot the Security Market Line (SML) Superimpose the CAPM’s required return on the SML Indicate which investments will plot on, above and below the SML? If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.

Plot the Security Market Line (SML) Superimpose the CAPM’s required return on the SML Indicate which investments will plot on, above and below the SML? If an investment’s expected return (mean return) does not plot on the SML, what does it show? Identify undervalued/overvalued investments from the graph.

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 4LO

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