Greater Risk Aversion Results in Lower Required Returns for Each

question 137

True/False

Greater risk aversion results in lower required returns for each level of risk, whereas a reduction in risk aversion would cause the required return for each level of risk to increase as depicted by SML.

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Definitions:

Conductor

A device or material that permits current to flow through it easily.

Circular Mil

An area measure of wire determined by squaring the diameter of the wire in mils (1 mil = 0.001 inch). Example: A wire with a diameter of 0.020 inch would have a circular mil area of 400 cmil (20 x 20 = 400).

Radius

A straight line from the center to the circumference of a circle or sphere.

Diameter

A straight line passing from side to side through the center of a body or figure, especially a circle or sphere, measuring the overall distance across.