The Slope of the Security Market Line Is Equal to The

question 60

Multiple Choice

The slope of the security market line is equal to the:

• A)market risk premium.
• B)risk-free rate of return.
• C)market rate of return.
• D)market rate of return multiplied by any security's beta, given an inefficient market.
• E)market rate of return multiplied by the risk-free rate.

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Definitions:

Inductive Reasoning

A logical process in which multiple premises, all believed true or found true most of the time, are combined to obtain a specific conclusion.

Accounting Theory

A framework of principles that underlie the practice and methodology of accounting in financial reporting.

Normative Theories

Theories that prescribe how things should be or how decisions should be made, often applied in ethics, economics, and law.

Positive Accounting Theory

An accounting theory that seeks to explain and predict accounting practices, focusing on the relationships between various parties involved in accounting.