Which of the Following Statements Is CORRECT

question 9

Multiple Choice

Which of the following statements is CORRECT?

• 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:

Subtle Aggression

A form of indirect aggression characterized by understated or concealed actions aimed at harming another individual emotionally or psychologically.

Overt Aggression

Visible, external acts of aggression, such as physical violence or verbal threats, as opposed to covert or internalized forms.

Covert Aggression

A form of aggression where the aggressive acts are hidden or disguised, making it less obvious to others.

Normative Social Influence

The influence other people have on us because we want them to like us.