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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B. the transfer of energy from one organism to another
I personally think the answer is a
The missing word is Compensation.
Alfred Adler was known to be a medical doctor, a psychotherapist and is also a founder of the of the school of individual psychology.
According to Adler, individual psychology has got to do with this case wherein Ethan develops strength in other areas such as the compensation. In Adler's theory and principle, psychology owns compensation and overcompensation.
Answer:
Predictive validity.
Explanation:
As the exercise suggests with the Psychology Aptitude Test (PAT) scoring system; the predictive validity is a way of calculating how a determined score on a test predicts scores on a certain criterion measure. In other words, this is a correlation between tests and ratings; as shown in the example provided by the exercise: "Their scores were later compared to their performance in the introductory psychology course, and high scores on the PAT were related to high grades in the course".
