The Y-Axis Intercept of the SML Represents the Required Return

question 60

True/False

The Y-axis intercept of the SML represents the required return of a portfolio with a beta of zero, which is the risk-free rate.

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Definitions:

Economic Profit

The financial gain achieved by a firm or individual after deducting both explicit (direct) and implicit (indirect, such as opportunity costs) costs from total revenues.

Investment

Committing funds to assets with the goal of earning returns over time.

Interest Rate

The percentage charged on the total amount borrowed or earned on investments, representing the cost of borrowing or the gain on saved or invested money.

Capital Market

Refers to financial markets where long-term debt or equity-backed securities are bought and sold.