Which of the Following Statements Is Correct

question 132

Multiple Choice

Which of the following statements is correct?

• A)A graph of the SML as applied to individual stocks would show required rates of return on the vertical axis and standard deviations of returns on the horizontal axis.
• B)The CAPM has been thoroughly tested, and the theory has been confirmed beyond any reasonable doubt.
• C)If investors become more risk averse, then (1) the slope of the SML would increase and (2) the required rate of return on low-beta stocks would increase by more than the required return on high-beta stocks.
• D)An increase in expected inflation, combined with a constant real risk-free rate and a constant market risk premium, would lead to identical increases in the required return on a riskless asset and on an average stock, other things held constant.