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
Archaeologists have studied many of the ancient cities of the Mayans such as Tikal, Calakmul and Copan. They studied the glyphs left
Where's the problem? I can not see the problem
Explanation:
2 accoplishments were:
1) A more efficient means to transport goods- The cost to ship goods from New York to the modern day midwest drastically decreased thanks to the development of the Erie Canal.
2) Growth of cities in New York and the Midwest- The Erie Canal connected the eastern and western portions of New York, allowing for cities to prosper throughout the state. This included cities like Rochester and Syracuse. Along with this, the Erie Canal also allowed for easy access to the Midwest since it connected to the Great Lakes. This allowed for cities like Cleveland to develop into an important trading hub.
Answer:
SIDS (sudden infant death syndrome)
Explanation:
SIDS is the unapprehended death of a human less than a year old.
SIDS is most common when the infant is 2-4 months old, and most cases happen during sleep (hence another name for SIDS, "crib death").