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:

Monopsony

A market in which a single buyer has no rivals.

Collective Bargaining

The process by which employers and unions negotiate terms of employment, including wages, working hours, and working conditions, to reach a labor agreement.

Economic Disruption

A significant disturbance to the normal functions of an economy caused by external or internal events.

Labor Union Membership

The status of workers who belong to an organization that represents their collective interests in negotiations with employers regarding wages, hours, benefits, and working conditions.