CML and SML Measure Total Risk by the Standard Deviation

question 28

True/False

CML and SML measure total risk by the standard deviation of the investment.

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Definitions:

Present Value Interest Factors

A factor used to calculate the present value of a single future payment or a series of future payments, discounted back to the present at a given interest rate.

Guaranteed Residual Value

The estimated value that a leased asset will have at the end of the lease term, as guaranteed by a third party or the lessee.

Maintenance Agreement

A contract between two parties in which one agrees to maintain an asset owned by the other party, in return for a fee.

Implicit Lease Rate

The interest rate assumed in the calculation of lease payments, not always explicitly stated in the lease agreement.