Question

The Security Market Line Group of answer choices usually has a negative slope. shows the highest...

The Security Market Line

Group of answer choices

usually has a negative slope.

shows the highest historical return earned by an asset.

is a minimum standard of return for an asset.

is calculated by taking the risk-free rate of return and multiplying it by beta.

Homework Answers

Answer #1

The Correct option is D

Security Market line is a Graphical figure of the Capital asset pricing Model equation, The SML Line starts from the Y-Axis as the difference between the Origin and the Y-axis is the risk free return that an investor gets and it moves to upward direction when the beta is increased as it shows that an investor would get higher return if they invest in securities with higher beta.

The equation of SML Line is

Expected return = Rf + B ( Rm - Rf)

where, Rf is risk free return,
B is beta

Rm is market return

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following is not true about the Capital Market Line, the Security Market Line,...
Which of the following is not true about the Capital Market Line, the Security Market Line, and the Security Characteristic Line? Multiple Choice CML is the line that goes through the risk-free asset and the optimal risky portfolio SML has beta on the x-axis The y-axis for SCL has the excess return on the market The slope of SCL is beta
The slope of the Security Market Line is equal to A) beta. B) the risk-free interest...
The slope of the Security Market Line is equal to A) beta. B) the risk-free interest rate. C) the equity premium. D) none of the above
The beta of any portfolio can be computed as the a. slope of the security market...
The beta of any portfolio can be computed as the a. slope of the security market line b. sum of the betas for each asset held in the portfolio divided by the number of assets in the portfolio. c. weighted average of the betas for each asset held in the portfolio. d. the standard deviation of the expected returns of the portfolio minus the risk-free rate.
Which of the following statement is FALSE? Group of answer choices When using all risky assets...
Which of the following statement is FALSE? Group of answer choices When using all risky assets available in the market in the market and the risk-free asset to form portfolio, we find that all efficient portfolios are on the Capital Market Line (CML). If the CAPM holds, then all assets will graph on the Security Market Line (SML). If an asset graph above the SML, then this asset is under-priced according to the CAPM. Portfolios on the Capital Market Line...
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
As an analyst you have gathered the following information: Security Expected Standard Deviation Beta Security 1...
As an analyst you have gathered the following information: Security Expected Standard Deviation Beta Security 1 25% 1.50 Security 2 15% 1.40 Security 3 20% 1.60 (i)      If the expected market risk premium is 6% and the risk-free rate is 3%, what will be the required rate of return on each of the above securities, and which of the security has the highest required return? (ii)     With respect to the capital asset pricing model, if expected return for Security 2...
Shifts in the security market line   Assume that the​ risk-free rate, Upper R Subscript Upper F​,...
Shifts in the security market line   Assume that the​ risk-free rate, Upper R Subscript Upper F​, is currently 9​%, the market​ return, r Subscript m​, is 13 %​, and asset A has a​ beta, b Subscript Upper A​, of 1.39. a.  Use CAPM to estimate the required​ return, r Subscript Upper A​, on asset A. Which of the following graphs represents the security market line​ (SML) and the required return for asset​ A? b.  Assume that as a result of...
Which of the following is/are TRUE? I. The security market line can be thought of as...
Which of the following is/are TRUE? I. The security market line can be thought of as expressing relationships between expected required rates of return and beta. II. A stock with a beta of zero would be expected to have a rate of return equal to the risk-free rate. III. Assume that the capital asset pricing model holds. Then, a security whose expected return falls below the SML (security market line) indicates that the security is undervalued, whereas a security whose...
Assets X and Y plot on the security market line. Asset X has an expected return...
Assets X and Y plot on the security market line. Asset X has an expected return of 12% and a beta of 1.5, and asset Y has an expected return of 10% and a beta of 1.2. The expected market risk premium is: a) 8.70% b) 9.54% c) 10.20% d) 6.67% e) 9.27%
Which of the following statements is incorrect? Group of answer choices Left-hand side of the accounting...
Which of the following statements is incorrect? Group of answer choices Left-hand side of the accounting balance sheet shows the book value of the firm’s assets, based on historical costs. All the answers are correct except one. The difference between the expected return on the market and the risk-free rate is known as the market risk premium. Current cost of long-term debt is the appropriate cost of debt for WACC calculations. The best method to use when estimating risk-free interest...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT