The Vertical Intercept of the Security Market Line (SML) Shows

question 295

Multiple Choice

The vertical intercept of the Security Market Line (SML) shows the

• A) amount of arbitrage.
• B) risk-free interest rate.
• C) beta of the market portfolio.
• D) risk premium for the market portfolio.

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Definitions:

Controlling Interest

Ownership interest in a business entity through holding more than 50% of its voting shares, granting the ability to control decisions and policies.

Equity Method

Accounting for investments with significant influence, where the investment's carrying amount is adjusted for the investor's share of the investee's profits or losses.

Small Acquisitions

Refers to the purchase of smaller companies, typically involving less financial risk and a simpler integration process compared to larger mergers and acquisitions.

Consolidated Net Income

The total earnings of a company and its subsidiaries after taxes and interest, adjusted for minority interests.