The Security Market Line (SML) Is Upward-Sloping, Indicating That the

question 76

Multiple Choice

The Security Market Line (SML) is upward-sloping, indicating that the

• A) beta of an investment increases as its risk level increases.
• B) average expected return on investments decreases as their risk level decreases.
• C) average expected return on the risk-free asset increases as its beta increases.
• D) average expected return of the market portfolio increases as its beta increases.

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Definitions:

Equity Repurchases

The method through which a corporation repurchases its shares from the market, thus decreasing the total number of shares available.

Fixed Cost

Expenses that do not change in total regardless of the level of production or sales activity, such as rent, salaries, and insurance.

Raw Materials

Raw materials are the basic substances or components used in the manufacture or production of goods.

Direct Labour

The labor costs associated with employees who are directly involved in the production of goods or services.