Draw the security market line when the expected return for risk-free Tbill is 5%, the market required rate of return is 12% and when the beta is 2 the required rate of return is 19%. You may draw the graph freehand. Indicate on your graph as Point B, a stock with a beta of 0.6 and expected returns of 14% and Point C, a stock with a beta of 1.5 and an expected return of 10%.

Take a picture of your graph and attach.

Is Stock B overvalued or undervalued?

Is Stock C overvalued or undervalued?

Explain your answer.