If an Asset Has a Risk-Return Combination That Is Below

question 91

Multiple Choice

If an asset has a risk-return combination that is below the Security Market Line (SML) , then this indicates that the asset's:

• A) Expected rate of return is lower than could be had from some combination of the risk-free asset and the market portfolio
• B) Expected rate of return is higher than could be had from some combination of the risk-free asset and the market portfolio
• C) Price will rise as arbitrage proceeds in the market
• D) Risk will rise as arbitrage proceeds in the market