Which of the Following Statements About the Security Market Line

question 106

Multiple Choice

Which of the following statements about the Security Market Line are correct?
I. The intercept point is the risk-free rate of return.
II. The slope of the line is beta.
III. An investor should accept any return located above the SML line.
IV. A beta of 1.0 indicates the risk-free rate of return.

• A) I and II only
• B) III and IV only
• C) II, III and IV only
• D) I, III and IV only

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Definitions:

Back-Arc Spreading

The formation of new oceanic crust behind a volcanic arc, resulting from the divergent movement of plates at a convergent boundary, a reiteration emphasizing plate tectonic mechanisms.

Mesozoic Jurassic

A geologic period within the Mesozoic Era, known for the dominance of dinosaurs and the presence of significant geological and climatic changes.

Thrust Sheets

Large sections of the Earth's crust that have been moved horizontally over other rocks by tectonic forces.

Ocean Floor

The bottom surface of an ocean basin, consisting of various geological features including trenches, volcanoes, and flat plains.