Which of the Following Is True About the Security Market

question 94

Multiple Choice

Which of the following is true about the Security Market Line (SML) ? The SML:

• A) Expresses a relationship between expected returns and systematic (non-diversifiable) risk.
• B) Expresses the equilibrium relationship between expected returns and risk for all stocks.
• C) Expresses the long-run average return.
• D) Is a function of beta.
• E) All of the above are true.

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Definitions:

Marginal Cost

The increase in total cost that arises from an extra unit of production.

Labor-supply Curve

A graphical representation showing the relationship between the quantity of labor supplied and the wage rate.

Leisure

Time spent away from work and other duties, free for relaxation or activities of personal choice.

Marginal Product

Marginal product is the additional output that is generated by using one more unit of a particular input, holding all other inputs constant.