The Security Market Line Is Not Stable Over Time and Shifts

question 45

True/False

The security market line is not stable over time and shifts in it can result in a change in required return.

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Definitions:

Disbursement of Funds

The act of paying out money from a fund or account to cover expenses or investments.

Collateral Position

Collateral is property or assets that a borrower offers to a lender as security for a loan, which can be taken by the lender if the borrower fails to repay.

Stretching Payables

Paying invoices after they’re due according to the terms of sale. Also called leaning on the trade.

Short-term Loans

Loans that are scheduled for repayment within a short timeframe, usually less than one year.