Utilising the Security Market Line an Investor Owning a Stock

question 10

Multiple Choice

Utilising the security market line an investor owning a stock with a beta of −2 would expect the stock's return to ____ in a market that was expected to decline 15 per cent.

• A) rise or fall an indeterminate amount
• B) fall by 3 per cent
• C) fall by 30 per cent
• D) rise by 13 per cent
• E) rise by 30 per cent

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Definitions:

Island Arcs

Curved chains of volcanic islands located along convergent tectonic plate boundaries, typically with deep ocean trenches on the convex side.

Abyssal Plains

Very flat, deep-sea floors found at depths between 3,000 and 6,000 meters, making up a large portion of the ocean's basin.

Oceanic Fracture Zones

Linear oceanographic features caused by the movement of tectonic plates, characterized by significant variations in depth and topography.

Seafloor

The bottom of an ocean or sea, composed of various geological features including ridges, valleys, plains, and trenches, shaped by processes like volcanic activity, sediment deposition, and tectonic movements.