When Markets Are in Equilibrium,the CML Is Upward Sloping

question 50

Multiple Choice

When markets are in equilibrium,the CML is upward sloping:

• A)because it shows the optimum combination of risky securities.
• B)because the price of risk must always be positive.
• C)because it contains all securities weighted by their market values.
• D)because investors expect returns to increase over time.

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Definitions:

Budget Line

A graphic representation of all possible combinations of two goods that can be purchased at given prices and a given income.

Indifference Analysis

A microeconomic tool used to analyze consumer preferences indicating combinations of goods among which the consumer is indifferent, showing levels of utility.

Numerically Measurable

Quantifiable or capable of being expressed or measured in numerical terms.

Indifference Curve

A graph showing different bundles of goods between which a consumer is indifferent, indicating the combinations provide the same level of utility to the consumer.