Which of the Following Is a FALSE Statement About the Security

question 108

Multiple Choice

Which of the following is a FALSE statement about the security market line (SML) ?

• A)It is upward sloping, which indicates that investors require a higher expected return on riskier securities.
• B)It represents the trade off between total risk and the required rate of return for any risky security.
• C)It indicates that the size of the risk premium varies directly with a security's market risk, as measured by beta.
• D)It implies that securities with betas less than the market beta of 1.0 are less risky than the "average" stock and will therefore have lower required rates of return.

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Definitions:

Confidence Interval

A bracket of numbers, taken from the study of a sample, poised to contain the value of a not-identified population parameter.

Standard Deviation

A statistical measure that represents the dispersion or variability of a set of data points around their mean.

Sample Size

Refers to the number of observations or elements selected from a population for the purpose of statistical analysis.

Population Standard Deviation

A measure of the dispersion of a set of data from its mean, calculated for the entire population.