What Would You Recommend to an Investor Who Is Considering

question 55

Multiple Choice

What would you recommend to an investor who is considering an investment that, according to its Beta, plots below the security market line (SML) ?

• A)invest; return is high relative to risk
• B)don't invest; risk is high relative to return
• C)invest; stocks revert to the SML over time
• D)don't invest; stocks below the SML have too much unique risk

---

Definitions:

Charles Beard

An influential American historian who proposed that the Constitution was designed to protect the economic interests of its framers.

U.S. Constitution

The supreme law of the United States, established in 1787, outlining the nation's fundamental laws and principles, and the structure of its government.

Special-Interest Group

A group formed to advocate for specific interests or issues within a political, economic, or social context.

Margaret Sanger

An American birth control activist, sex educator, and nurse who popularized the term "birth control" and opened the first birth control clinic in the United States.