Which of the Following Statements Is Correct

question 4

Multiple Choice

Which of the following statements is correct?

• A)The slope of the SML is determined by the value of beta.
• B)The SML shows the relationship between companies' required returns and their diversifiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by managers.
• C)Suppose 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 investors in the market expect the observed relationship to continue on into the future.
• D)If investors become less risk averse, the slope of the SML will increase.

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Definitions:

Multidomestic Strategy

A business strategy that involves tailoring products or services to fit the specific demands of local markets.

Bartlett and Goshal

Scholars known for their work on international business strategy, particularly for their theories on how multinational companies should be managed.

Decentralized Decision-Making

A management strategy where decision-making authority is distributed among various levels within the organization, rather than being centralized in a single point of leadership.

Geocentric Staffing Model

An approach to staffing for international businesses that seeks the best people for key jobs throughout the organization, regardless of nationality.