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:

\(n + 2\)

Represents an algebraic expression in which 2 is added to a variable n.

\(n + 1\)

An expression representing one more than a given number \(n\).

\(( n + 6 ) !\)

A notation indicating the factorial of n plus 6, meaning the product of all positive integers up to n+6.

\(( n + 3 ) !\)

Denotes the factorial of the sum of a variable n and 3, representing the product of all positive integers up to and including (n+3).