Which of the Following Statements Is Correct

question 4

Multiple Choice

Which of the following statements is correct?

• A)The slope of the SML is determined by the value of beta.
• B)The SML shows the relationship between companies' required returns and their diversifiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by managers.
• C)Suppose you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor, assuming investors in the market expect the observed relationship to continue on into the future.
• D)If investors become less risk averse, the slope of the SML will increase.

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Definitions:

Introductory Offer

A promotional strategy involving a temporary low price or additional benefits to attract new customers or introduce a new product.

Sales Orientation

A business approach that focuses on making sales of existing products the priority, often at the expense of understanding or addressing the underlying needs of the customer.

Yoga Studio

A dedicated space where individuals participate in yoga classes or practices, often led by experienced instructors, focusing on physical postures, breathing techniques, and meditation for health and relaxation.

Market Share

The portion of a market controlled by a particular company or product, often expressed as a percentage of total sales in that market.