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The slope of the security market line is indicative of Question options: a. the current, relevant...

The slope of the security market line is indicative of Question options:

a. the current, relevant risk-free rate

b.the level of investor risk aversion

c. the risk of the individual security or portfolio of securities being evaluated

dthe current level of inflation

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Answer #1

Slope of Security market line is Rm - Rf, Market risk premium. It measures the addition return on market portfolio over the risk free asset.needed to compensate investor ready to take average amount of risk. It also reflect the degree of risk aversion in an investor. So, if inflation or risk free rate changes, it changes the security market line slope. And if investor risk aversion change, it also changes the security market line slope. So, Slope of the security market line is indicative of the level of investor risk aversion.

Option b is correct.

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