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

question 160

Multiple Choice

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

• A)The market risk premium would increase.
• B)Beta would increase.
• C)The slope of the SML would increase.
• D)The SML line would shift up.

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Definitions:

Reticular Formation

A network of neurons in the brainstem involved in consciousness and alertness.

Clock Radio

An electronic device that combines the features of a clock with a radio, often used as an alarm.

Substantia Nigra

Black nuclear mass in the midbrain; involved in coordinating movement and maintaining muscle tone.

Basal Nuclei

A group of nuclei in the brain involved in the control of voluntary motor movements, procedural learning, and emotions.