Which of the Following Statements Is Most Correct

question 84

Multiple Choice

Which of the following statements is most correct?

• A) The SML relates required returns to firms' systematic (or market)risk.The slope and intercept of this line cannot be controlled by the financial manager.
• B) The slope of the SML is determined by the value of beta.
• C) If you plotted the returns of a given stock against those of the market,and you found that the slope of the regression line was negative,the CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well-diversified investor,assuming that the observed relationship is expected to continue on into the future.
• D) If investors become less risk averse,the slope of the Security Market Line will increase.
• E) Statements a and c are both true.

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Definitions:

Experience

The knowledge or skill acquired by a person through direct participation in events or activities.

Mind-Brain Problem

A philosophical and scientific question concerning the relationship between consciousness (mind) and the physical brain, including how mental states are related to brain processes.

Control

The ability to shape or control the actions of others and the direction of events.

Brain

The organ located in the head of an animal that controls its thoughts, memory, feelings, and activity.