Which of the Following Statements Is CORRECT

question 113

Multiple Choice

Which of the following statements is CORRECT?

• A) The CAPM has been thoroughly tested, and the theory has been confirmed beyond any reasonable doubt.
• B) If two "normal" or "typical" stocks were combined to form a 2-stock portfolio, the portfolio's expected return would be a weighted average of the stocks' expected returns, but the portfolio's standard deviation would probably be greater than the average of the stocks' standard deviations.
• C) If investors become more risk averse, then (1) the slope of the SML would increase and (2) the required rate of return on low-beta stocks would increase by more than the required return on high-beta stocks.
• D) An increase in expected inflation, combined with a constant real risk-free rate and a constant market risk premium, would lead to identical increases in the required returns on a riskless asset and on an average stock, other things held constant.
• E) A graph of the SML as applied to individual stocks would show required rates of return on the vertical axis and standard deviations of returns on the horizontal axis.

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Definitions:

Cell Division

A process by which a cell divides into two or more cells, a fundamental aspect of the life cycle in both eukaryotic and prokaryotic organisms.

Tissue Types

Categories of biological tissue, including epithelial, connective, muscle, and nervous tissues, each with distinct functions and structures in the body.

Cell Types

various forms of cells that have unique structures and functions, making up different tissues and organs in living organisms.

Plants

Organisms belonging to the kingdom Plantae that are primarily autotrophic, photosynthetic, and multicellular, commonly found on land.