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

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Definitions:

Aversive Conditioning

A behavioral technique involving the use of unpleasant stimuli to reduce or eliminate undesirable behaviors.

Psychoanalysis

A therapeutic approach founded by Sigmund Freud that explores how unconscious thoughts and childhood experiences influence behavior and mental states.

Repressed Feelings

Emotions or thoughts that have been unconsciously blocked from consciousness due to being perceived as unacceptable or threatening.

Inner Conflicts

Psychological struggles within oneself, often arising from competing desires, beliefs, or needs.