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.
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Nowhere was that diversity more evident in pre-Revolutionary America than in the middle colonies
The government of the Soviet Union followed an unofficial policy of state atheism, aiming to gradually eliminate religious belief within its borders. While it never officially made religion illegal, the state nevertheless made great efforts to reduce the prevalence of religious belief within society.
The correct answers to these open questions are the following.
Unfortunately, you did not provide any options to answer the sentences. Without options, what we can do is to share the best answer possible according to our knowledge of the topic.
The arrival of Europeans in the Americas led to the conquest of the Incan and Aztec empires.
One advantage the Spanish had in their conflict with the Aztec and Inca was their weaponry.
The Spanish wanted to conquer early American civilizations to gain power over other European nations
After the Spanish arrived in the Americas, the Aztec and Inca were weakened by the spread of disease.
We are talking about the times of the conquering of the two most important civilizations in pre-Hispanic times: the Aztec Empire in Mesoamerica and teh Inca Empire in South America.
The Aztecs thought that the Spaniards were their gods, according to their ancestors' prophecy that referred to the return of Quetzalcoatl, their most important god. That is why the Aztecs welcomed the Spaniards with open hands.
The Spanish had better weapons, fire weapons, and convinced the Aztec's enemies to unite and fight for retribution.
In both cases, Aztecs and Incas suffered from the series of diseases that Spaniards brought to the Americas. We are talking about malaria, cholera, chickenpox, smallpox, and influenza.
<u>Rules- </u>
There are many ways that people can influence our behavior, but perhaps one of the most important is that the presence of others seems to set up expectations
We do not expect people to behave randomly but to behave in certain ways in particular situations. Each social situation entails its own particular set of expectations about the “proper” way to behave. Such expectations can vary from group to group.
One way in which these expectations become apparent is when we look at the roles that people play in society.
<u>Norms- </u>Social norms are the unwritten rules of beliefs, attitudes, and behaviors that are considered acceptable in a particular social group or culture. Norms provide us with an expected idea of how to behave, and function to provide order and predictability in society. For example, we expect students to arrive to a lesson on time and complete their work.
The idea of norms provides a key to understanding social influence in general and conformity in particular. Social norms are the accepted standards of behavior of social groups.
These groups range from friendship and workgroups to nation-states. behavior which fulfills these norms is called conformity, and most of the time roles and norms are powerful ways of understanding and predicting what people will do.
There are norms defining appropriate behavior for every social group. For example, students, neighbors and patients in a hospital are all aware of the norms governing behavior. And as the individual moves from one group to another, their behavior changes accordingly.
Norms provide order in society. It is difficult to see how human society could operate without social norms. Human beings need norms to guide and direct their behavior, to provide order and predictability in social relationships and to make sense of and understanding of each other’s actions. These are some of the reasons why most people, most of the time, conform to social norms.
