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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<span>B) the interests of the common man
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Answer:
what was memorized was the idea of "light" as a description of weight, not "light" as illumination
Explanation:
When the research participant memorized the words “heavy – light” his brain associated with the words “light” unicament in the sense of weight. In this context, the participant's brain disassociated the word from any meaning other than that previously associated. Thus, when faced with the word "light" written with the sense of luminosity, the participant's brain did not allow the participant to remember that he had seen this word before.
Answer:
Having more oil than water can majorly affect the country because - as we already know - oil is very damaging to the environment if mishandled, however, it brings in a pretty hefty profit. Although it brings in money, water is more important. That brings us to the answer to our question: Having more oil than water affects the way that the countries economy functions because the less water you have, the more the people of the country are effected and the more that the countries economy is damaged (this means that people are then being negatively effected and this can cause everything to fall apart).
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Explanation:
