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Position of nab shares relative to the security market line

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NAB's shares have a beta of 1.25, the 12 month risk free rate is 4%, and the expected return of market portfolio is 6%. However, its shares are currently priced to achieve 8% p.a. expected rate of return. Explain the position of NAB's shares relative to the Security Market Line, outline a buying or selling strategy for a rational investor based on this information and your calculation above.

Reference no: EM132528672

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