The Security Market Line Approach

question 360

Multiple Choice

The security market line approach:

• A) Provides an actual cost of equity because the risk level of the firm is known with certainty.
• B) Provides an actual cost of equity because the market risk premium is constant over time and across assets.
• C) Relies on the past as a predictor of the future.
• D) Is less applicable to business firms than the dividend growth model.
• E) Considers the projected growth rate of the firm.

---

Definitions:

Population

The total number of individuals or inhabitants in a specified area or group, often analyzed for demographic studies.

Earth's Size

A measure of the planet's dimensions, including its diameter and circumference.

Gravitational Mass

A measure of the amount of matter in an object, which determines the strength of its gravitational attraction to other objects.

Gaseous Molecules

Particles consisting of two or more atoms bonded together that exist in the gas state at room temperature.