Which of the Following Statements Is CORRECTσ

question 61

Multiple Choice

Which of the following statements is CORRECTσ

• A) 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 its managers.
• B) 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 expect the observed relationship to continue on into the future.
• C) if investors become less risk averse, the slope of the security market line will increase.
• D) if a company increases its use of debt, this is likely to cause the slope of its sml to increase, indicating a higher required return on the stock.
• E) the slope of the sml is determined by the value of beta.

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Definitions:

Ticket Sales

The process and revenue generated from selling tickets for events such as movies, concerts, sports, and other performances.

Revenue Maximization

A strategy or objective focused on increasing the total income generated from sales or services, without necessarily maximizing profit.

Cournot Equilibrium

The Cournot equilibrium is a concept in economic theory where firms reach a state of balance in quantity and price in a duopoly, where each firm's output decision best responds to the output decision of the other firm.

Downward-Sloping

A term describing a curve or line that decreases in value as it moves from left to right, often used to describe demand curves in economics.