If One Uses a Long-Term Risk-Free Rate for the CAPM

question 40

True/False

If one uses a long-term risk-free rate for the CAPM instead of a short-term risk-free rate, then one will generate a flatter security market line.

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Definitions:

Year 2

Typically refers to the second year in a given context, such as the second year of a company's operations, a multi-year study, or an investment timeline.

Equity Multiplier

A financial ratio that measures a company's leverage, calculated as total assets divided by total equity.

Year 2

The second year in a given time frame or series, often referring to fiscal or calendar years.

Operating Cycle

The average period of time it takes for a company to purchase inventory, sell products, and collect cash from customers.