The Security Market Line (SML)

question 22

Multiple Choice

The Security Market Line (SML)

• A) shows the relationship between a stock return and the market return but ignores risk.
• B) shows the relationship between risk and return.
• C) uses the AAA corporate bond rate for a riskless rate of return.
• D) none of the other answers are correct

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Definitions:

Highest Quintile

Refers to the top 20 percent of the population or distribution in terms of income, wealth, or other measurable attributes.

Income Received

The total amount of money or its equivalent received by an individual or organization before taxes and deductions.

Income Earned

The compensation received by individuals for their participation in productive activities, typically through wages, salaries, or profits.

Henry George

A 19th-century economist known for his ideas on taxation, particularly the proposal that a single tax on land value could replace all other taxes, thereby improving economic equality and efficiency.