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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Answer:
A "Utopia" is a systematical area with zero flaws
Opposite of a Dystopia
Usually, in a Utopia, everyone is equal, Every family is also equal.
in real life, a utopia couldn't possibly exist seeing as nobody is perfect.
Examples of Utopia: Heaven
Examples of Dystopia: Hunger Games
Answer:
D. They run from north to south
The pair that consists of the negative symptom of Schizophrenia is the abolition and hallucinations. The Schizophrenia is a long haul mental turmoil of a sort including a breakdown in the connection between thought, feeling, and conduct, prompting broken discernment, unseemly activities and sentiments, withdrawal from reality and individual connections into dream and daydream, and a feeling of mental fracture.
Explanation:
War?
The Cold War was important because it split the world into two rival sides that came into conflict with each other in a number of places around the world. This conflict has left us with, among other things, a huge aresenal of nuclear weapons, particularly in the US and in Russia.
