Which of the Following Statements About the Security Market Line

question 12

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 lower 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 lower the average investor's risk aversion, and thus the lower 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 lower 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 lower the return investors require as compensation for risk.

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Definitions:

Longitudinal Study

An observational research method that involves repeated observations of the same variables over a period of time.

Children's Development

The physical, cognitive, emotional, and social growth that occurs from infancy through adolescence.

Age

A measure of time that an individual, object, or concept has existed, often used as a variable in research for correlation with other factors.

Longitudinal

A research design that involves repeated observations of the same variables over short or long periods of time.