Which of the Following Is True About the Security Market

question 45

Multiple Choice

Which of the following is true about the security market line (SML) derived from the APT?

• A) The SML has a downward slope.
• B) The SML for the APT shows expected return in relation to portfolio standard deviation.
• C) The SML for the APT has an intercept equal to the expected return on the market portfolio.
• D) The benchmark portfolio for the SML may be any well-diversified portfolio.
• E) The SML is not relevant for the APT.

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Definitions:

Outstanding Ordinary Shares

The total number of shares currently held by shareholders, including restricted shares held by company officers and insiders, but not treasury shares.

Restricted Retained

Earnings that are not freely available for distribution to owners, often earmarked for compliance, legal, or operational purposes.