Which of the Following Statements About the Security Market Line

question 25

Multiple Choice

Which of the following statements about the security market line (SML) and investor's risk aversion is correct?

• A) The steeper the slope of the line, the lesser the average investor's risk aversion, and thus the greater the return investors require as compensation for risk.
• B) The steeper the slope of the line, the greater the average investor's risk aversion, and thus the greater the return investors require as compensation for risk.
• C) The steeper the slope of the line, the lesser the average investor's risk aversion, and thus the lesser the return investors require as compensation for risk.
• D) The steeper the slope of the line, the greater the average investor's risk aversion, and thus the lesser the return investors require as compensation for risk.
• E) The less steep the slope of the line, the greater the average investor's risk aversion, and thus the lesser the return investors require as compensation for risk.

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Definitions:

Functionalism

A perspective in psychology that emphasizes the purposes of behavior and mental processes and how they adapt to the environment.

Consciousness Purpose

Refers to the theories or explanations regarding why consciousness exists and its role in human cognitive processes and behavior.

Mental Images

The representation of objects, actions, or ideas that are not physically present, existing in the mind.

Adaptive Value

The concept referring to the beneficial traits or characteristics that enhance an organism's survival and reproduction in a given environment.