1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
Nina [5.8K]
1 year ago
9

Other things held constant, if investors become more risk averse, the security market line (sml) would (2 points)

Social Studies
1 answer:
poizon [28]1 year ago
6 0

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

You might be interested in
Cerebellum is to ________ memory as hippocampus is to ________ memory.
shepuryov [24]
<span>Cerebellum is to LONG-TERM memory as hippocampus is to SHORT-TERM memory.</span>
3 0
3 years ago
Read 2 more answers
Economy – write a description of the country’s economic system,
Inga [223]

South Africa's economical system is one of the most developed in the continent. ( in fact, the second after Namibia). The country had an amazing grow after 1994 and is trying to leave apartheid behind. Inflation was controlled, opportunities were equal, foreign capital was attracted.

As for trade partners, South Africa does businesses with Germany, China, Japan, the United States and Spain.

Over 45% of the electricity of Africa is generated in South Africa and an important sector is tourism. Cape Town is ranked as the first world destination.

However, unemployment rate is high ( more than 25%)

As far as literacy rate, in 2015, it was over 94%.

6 0
3 years ago
If sin a + b is equal to sin a × cos b + cos a × sin b then find the value of :
lisabon 2012 [21]
Answer:
1

Explanation:
sin
15
°
cos
75
°
+
cos
15
°
sin
75
°

=
sin
(
15
°
+
75
°
)
=
sin
(
90
)
=
1
3 0
3 years ago
"The world's poor are disproportionately affected by environmental degradation and lack of access to clean, affordable energy
Ganezh [65]

Answer:

Explanation:

D) Nigeria

3 0
3 years ago
Why was the Egyptian civilization able to develop peacefully?
DENIUS [597]

Answer:

A. It was isolated by physical geography.

Explanation:

The Nile River's physical features prevented enemies to attack the Egyptians. So the Egyptians civilization developed peacefully. Food, water, trade, transportation, fertile soil for planting, protection. … The Nile River was important to early Egyptians because it had fertile land.

Hope this helped! Have a nice day!
Please give Brainliest when you can.

<em>-Jaron, King of Carthya.</em>

6 0
2 years ago
Other questions:
  • The premise that effective leaders possess personal qualities that set them apart from ineffective leaders is based on the _____
    10·1 answer
  • Ok this is kinda easy...
    7·1 answer
  • Which one is it? i have the same question
    10·1 answer
  • Although not a nation, Kurdistan is a region inhabited by a distinct ethnic group, the Kurds. Which number on the map is CLOSEST
    5·2 answers
  • A politician extols the positive effects that being in the Boy Scouts and Girl Scouts has. The politician touts the negative cor
    10·1 answer
  • In your opinion, do people still recognize “the importance of education to our democratic society”? Why or why not?
    6·1 answer
  • How mass media contribute to social reproduction​
    6·1 answer
  • Read the scenario below and answer the question that follows. crystal’s family has noticed that she is always looking up informa
    13·1 answer
  • What is the pH of normal rainfall in the United States?<br> 2<br> 6.8<br> 5.6<br> 3.5
    6·1 answer
  • Reviewing information on majors such as its introductory courses, required courses, and office location is described as _____.
    11·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!