Problem 6.6. In each of the following cases, given a property about a security S,...
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Problem 6.6. In each of the following cases, given a property about a security S, specify whether it means that the security lies above or below or on CML (Capital Market Line) when its expected return is plotted against its standard deviation or the security lies above or below or on SML (Security Market Line) when its expected return is plotted against its beta. That is, in each case, answer one of the following: - Above CML - Below CML - On CML - Above SML - Below SML - On SML (a) S is underpriced (b) S has idiosyncratic risk (c) Expected return of S is less than required return (d) S has the highest Sharpe ratio possible (e) CAPM equation holds for S (f) S is well-diversified
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