In this video, we dive into the Security Market Line (SML) and its relationship with undervalued, fairly valued, and overvalued stocks. By using a simple formula, students can understand how to determine whether a security is priced correctly based on its beta and expected return. The video walks through examples of each scenario, demonstrating how a stock’s position relative to the SML reveals its value. Whether the return is greater than, equal to, or less than the market return, students will grasp the intuitive process for identifying pricing misalignments in securities.