Question: The security market line (SML) shows the relationship between beta and expected return. The following graph shows stocks' betas (R) and expected returns (u): SML

 The security market line (SML) shows the relationship between beta and

The security market line (SML) shows the relationship between beta and expected return. The following graph shows stocks' betas (R) and expected returns (u): SML E A D Am M rt B B 1 Assume that the CAPM holds and expectations of stocks' returns and betas are correctly measured. Which statement is NOT correct? O a. The price of Stock A will rise, and the excess return of Stock A will fall. O b. Stock E has more systematic risk than the market portfolio. O c. Stock B is underpriced. O d. Stock D has a negative excess return (a negative alpha). O e. Rational investors should buy Stock C

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