If an Asset Has a Risk-Return Combination That Is Below

question 50

Multiple Choice

If an asset has a risk-return combination that is below the Security Market Line (SML) , then this indicates that the asset's

• A) expected rate of return is lower than could be had from some combination of the risk-free asset and the market portfolio.
• B) expected rate of return is higher than could be had from some combination of the risk-free asset and the market portfolio.
• C) price will rise as arbitrage proceeds in the market.
• D) risk will rise as arbitrage proceeds in the market.

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Definitions:

Milgram's Obedience Studies

A collection of experiments in social psychology carried out by Stanley Milgram, assessing how likely individuals are to follow orders from an authority figure that clash with their own moral compass.

Obedience

The act of following orders or directions from authority, or conforming to rules or laws.

Bystander Effect

In social psychology, this refers to the occurrence where people are less inclined to provide aid to someone in distress if there are others present.

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The tendency for individuals to exert less effort when working in a group than when working alone.