Which of the Following Statements About the Difference Between the SML

question 7

Multiple Choice

Which of the following statements about the difference between the SML and the CML is true?

• A) The intercept of the CML is the origin, whereas the intercept of the SML is RF.
• B) The CML applies to efficient portfolios, whereas the SML applies to all portfolios or securities.
• C) The CML can be downward sloping, whereas that is impossible for the SML.
• D) The CML and the SML are essentially the same except for the price of risk.

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Definitions:

Restricts

Limits or confines actions, behaviors, or movements within certain parameters or conditions.

Unqualified Endorsements

Endorsements on negotiable instruments, such as checks, without any limitations, making the endorser fully liable.

Special

Distinguished by a unique or particular quality, purpose, or condition from what is ordinary or common.

Overdue

A status indicating that a payment or obligation was not fulfilled or completed by its due date.