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Security market line implied by the information

Problem:

The market has an expected return of 10% and the risk-free rate is 4%.

Based on the security market line implied by this information, which of the following securities are correctly priced and which are over/underpriced?

Beta    Actual Return

Stock 1    0.60    7.00%
Stock 2    1.00    11.00%
Stock 3    1.30    12.00%
Stock 4    1.70    19.00%

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Finance Basics: Security market line implied by the information

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Finance Basics: Security market line implied by the information

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