Which of the Following Statements Is Correct

question 91

Multiple Choice

Which of the following statements is correct?

• A) If investors become more risk averse but rRF does not change, then the required rate of return on high-beta stocks will rise and the required return on low-beta stocks will decline, but the required return on an average-risk stock will not change.
• B) An investor who holds just one stock will generally be exposed to more risk than an investor who holds a portfolio of stocks, assuming the stocks are all equally risky.
• C) The slope of the yield curve has no effect on the slope of the SML.
• D) Assume that the required rate of return on the market, rM, is given and fixed at 10%. If the yield curve were upward sloping, then the Security Market Line (SML) would have a steeper slope if 1-year Treasury securities were used as the risk-free rate than if 30-year Treasury bonds were used for rRF.

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Definitions:

Extend Credit

Involves offering a loan or allowing goods or services to be purchased now with the agreement to pay later.

Incomes Below

Refers to earnings that fall beneath a specified benchmark, often used in discussions about poverty levels or eligibility for financial assistance.

Fair Credit Billing Act

A federal law designed to protect consumers from unfair billing practices and provide a mechanism for addressing billing errors in credit accounts.

Charge Account

A type of credit account that requires the full payment of the bill at the end of a billing cycle.