The Security Market Line (SML)relates Risk to Return, for a Given

question 177

Multiple Choice

The Security Market Line (SML) relates risk to return, for a given set of market conditions. If risk aversion increases, which of the following would most likely occur?

• A)The market risk premium would increase.
• B)The risk-free rate would increase.
• C)The slope of the SML would increase.
• D)Both a & c
• E)All of the above

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