The Faster an Automobile Is Driven (Speed), the Lower the Miles

question 164

Multiple Choice

The faster an automobile is driven (speed) , the lower the miles per gallon (mpg) for that automobile. Given this information, we say that an automobile's speed and mpg have

• A) a direct relationship.
• B) an inverse relationship.
• C) a linear relationship.
• D) a maximum relationship.

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Definitions:

Risk Aversion

The tendency of investors to avoid unnecessary risk, preferring safer investments over riskier ones for the same expected return.

Capital Asset Pricing

A model that describes the relationship between the expected return of an investment and the risk, or beta, relative to the market.

Systematic Risk

The risk inherent to the entire market or market segment, which cannot be mitigated through diversification.

Security Market Line

A representation in financial markets of the relationship between risk and expected return, used in the Capital Asset Pricing Model.