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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Without evidence it’s like saying “trust me bro” you need evidence to support your claims and strengthen your argument.
Social Darwinism is the theory that B) life consists of competitive struggles in which only the strong survive. This theory applies Darwin's theory of natural selection to the social and political world. Those who supported this idea believe that in the social realm it is the responsibility of individuals to succeed and that those who are strong enough will and those that are not will fail. Those that support this theory did not support government programs to help the poor and other socially beneficial government policies.
Answer: A cottage industry is a small-scale, decentralized manufacturing business often operated out of a home rather than a purpose-built facility. Cottage industries are defined by the amount of investment required to start, as well as the number of people employed. They often focus on the production of labor-intensive goods but face a significant disadvantage when competing with factory-based manufacturers that mass-produce goods. word was initially applied to cottage industries in the countryside. In spite of the opposition of urban guilds, rural residents were performing many industrial tasks. Agricultural labor did not occupy the peasants during the entire year, and they devoted their free hours to such activities as spinning wool or weaving…
Try to summarize this if you have time..
The correct answer is C. Remittances represent capital flow from the home country to the host country.
Explanation:
Migration refers to the movement of people from their home country to a foreign country where they can stay temporarily or permanently. One of the main causes in migration nowadays is job opportunities as people from underdeveloped and developing countries including skilled and unskilled workers leave their countries for better job opportunities and in the case of some workers, especially unskilled workers they often sent part of the money earned in the foreign or host country to relatives in the home country, which is called Remittance. Therefore, remittances refer to a capital flow from the host country to the home country (not the opposite) and this supports the economies of both countries. Thus, the statement that is false about migration is "Remittances represent capital flow from the home country to the host country".
