The Slope of the Security Market Line Is

question 26

Multiple Choice

The slope of the security market line is:

• A) greater for high beta stocks.
• B) generally downward sloping.
• C) always the same.
• D) the same as the market risk premium.
• E) similar to the yield curve.

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Definitions:

Economic Exposure

The potential risk a company faces in its cash flow, earnings, and foreign investments due to changes in exchange rates and foreign exchange market conditions.

Forward Contracts

Financial agreements to buy or sell an asset at a predetermined future date and price, used primarily to hedge against price movements.

Exchange Rate

The worth of a currency when converting it into another currency.

Future

The time or period that comes after the present, often considered in terms of expectations, plans, or predictions.