Which of the Following Statements Is Most Correct

question 84

Multiple Choice

Which of the following statements is most correct?

• A) The SML relates required returns to firms' systematic (or market)risk.The slope and intercept of this line cannot be controlled by the financial manager.
• B) The slope of the SML is determined by the value of beta.
• C) If 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 that the observed relationship is expected to continue on into the future.
• D) If investors become less risk averse,the slope of the Security Market Line will increase.
• E) Statements a and c are both true.

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Definitions:

Graded Response

A response that varies in magnitude according to the intensity of the stimulus.

Repolarization

The process of restoring the resting state in a neuron or muscle cell after depolarization, typically signifying the recovery phase of an action potential.

Plasma Membrane

The lipid bilayer membrane that encloses the cytoplasm of a cell, controlling the movement of substances in and out of the cell.

Polarity

The condition of having distinct and opposite ends or poles, often relating to molecule orientation or cell differentiation.