Other things held constant, if the expected inflation rate DECREASES, and investors also become MORE risk averse, the Security Market Line would shift in<u> have a steeper slope </u>manner.
<h3>What is the Security Market Line (SML)?</h3>
The security market line (SML) is the Capital Asset Pricing Model (CAPM). It gives the market’s expected return at different levels of systematic or market risk. It is also called the ‘characteristic line’ where the x-axis represents the asset’s beta or risk, and the y-axis represents the expected return.
<u>Security Market Line Equation</u>
The Equation is as follows:
SML: E(Ri) = Rf + βi [E(RM) – Rf]
In the above security market line formula:
- E(Ri) is the expected return on the security.
- Rf is the risk-free rate and represents the y-intercept of the SML.
- βi is a non-diversifiable or systematic risk. It is the most crucial factor in SML. We will discuss this in detail in this article.
- E(RM) is expected to return on market portfolio M.
- E(RM) – Rf is known as Market Risk Premium.
<u>Characteristics of the Security Market Line (SML) are as below:</u>
- SML is a good representation of investment opportunity cost, which combines the risk-free asset and the market portfolio.
- Zero-beta security or zero-beta portfolio has an expected return on the portfolio, which is equal to the risk-free rate.
- The slope of the Security Market Line is determined by the market risk premium, which is: (E(RM) – Rf). Higher the market risk premium steeper the slope and vice-versa
- All the assets which are correctly priced are represented on SML.
- The assets above the SML are undervalued as they give a higher expected return for a given amount of risk.
- The assets below the SML are overvalued as they have lower expected returns for the same amount of risk.
Therefore, we can conclude that the correct option is A.
Learn more about Security Market Line (SML) on:
brainly.com/question/15877803
#SPJ4
Answer:
a
Explanation:
while we were under British rule, we felt that the king held too much power. the founding fathers worked really hard to create a system that would prevent one person from having too much power. although at the time there were not any term limits for president, Washington was very wary and aware that a third term could (unintentionally) give him too much power. also, he was growing old and felt that if he died while still in office, it would give Americans the impression that being president was a lifetime thing (which would also lead to one man holding a lot of power)
The reason why men enter into society is the preservation of their property
<h3>What is
property?</h3>
Any item over which a person or a business has legal title is considered property. Property can refer to either tangible items, such as houses, cars, or appliances, or intangible items with the promise of future value, such as stock and bond certificates.
There are three types of property in economics and political economy: private property, public property, and collective property (also called cooperative property).
Property is divided into two types: corporeal property and incorporeal property. Corporeal Property is seen and touched, whereas incorporeal Property is not. Furthermore, corporeal Property is the right to material possession, whereas incorporeal Property is an incorporeal right in rem.
To know more about property follow the link:
brainly.com/question/1538726
#SPJ4
Answer:
What is the relationship between capital and labor?
According to Marxism, the nature of the labor-capital relations of capitalism is the enforcement and exploitation of laborers by capital and the possession of workers' surplus value by the capitalist without remuneration.
Explanation:
>I hope I helped, God bless you
I'm sure its a persons life
