Question: Disequilibrium Example 15% Rm=11% E(r) SML 13% r=3% 1.0 1.25 Suppose a security with a of 1.25 is offering an expected return of 15%

Disequilibrium Example 15% Rm=11% E(r) SML 13% r=3% 1.0 1.25 Suppose a security with a of 1.25 is offering an expected return of 15% According to the SML, the E(r) should be 13% Is the security under or overpriced?

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