Which of the Following Statements Is CORRECT

question 61

Multiple Choice

Which of the following statements is CORRECT?
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• 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 its 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 expect the observed relationship to continue on into the future.
• D) ​If investors become less risk averse,the slope of the Security Market Line will increase.
• E) ​If a company increases its use of debt,this is likely to cause the slope of its SML to increase,indicating a higher required return on the stock.

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Definitions:

Behavior Therapy

A type of psychotherapy that focuses on changing undesirable behaviors through conditioning and learning.

Controlled Outcome Research

Research designed to evaluate the effectiveness of a treatment or intervention by comparing outcomes between a group receiving the intervention and a control group.

Bowenian Family Systems

A theory in family therapy that views the family as an emotional unit and uses systems thinking to describe complex interactions within the family.

Differentiation

In developmental psychology, differentiation refers to the process by which children or adolescents develop a sense of individuality, separating their identity from that of their parents or family.