Which of the Following Statements Is Correct

question 6

Multiple Choice

Which of the following statements is correct?

• A)If investors become more risk averse but r_RF does not change, then the required rate of return on high-beta stocks will rise and the required return on low-beta stocks will decline, but the required return on an average-risk stock will not change.
• B)An investor who holds just one stock will generally be exposed to more risk than an investor who holds a portfolio of stocks, assuming the stocks are all equally risky.
• C)The slope of the yield curve has no effect on the slope of the SML.
• D)Assume that the required rate of return on the market, r_M, is given and fixed at 10%. If the yield curve were upward sloping, then the Security Market Line (SML) would have a steeper slope if 1-year Treasury securities were used as the risk-free rate than if 30-year Treasury bonds were used for r_RF.

---

Definitions:

Specific Flavor

A distinct taste or aroma characteristic of a particular food, drink, or substance, differentiating it from others.

Sodium Amobarbital Test

A diagnostic procedure that uses a barbiturate to temporarily inactivate one hemisphere of the brain, helping to identify speech and memory functions.

Dichotic Listening

Experimental procedure for simultaneously presenting a different auditory input to each ear through stereophonic earphones.

fMRI Tests

Functional magnetic resonance imaging tests, a neuroimaging procedure that measures brain activity by detecting changes associated with blood flow.