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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<u>Answer:</u>
Late nineteenth-century, <em>Great Britain </em>believed that its was a superior civilization with laws, industry, values, and religion that had been a gift to the
world for centuries
<u>Explanation:</u>
It was Great Britain that claimed that they were the superior most in all aspects such as laws, culture, industrialisation, and religious values. They were the ones who first came up with the Industrial Revolution which bore an immense effect on their industrialisation and economy. Great Britain was then considered the most forward in technology and they also made strict laws to maintain their advancement. Christianity, which was the prevalent religion also played a very important role in developing their society.
Answer:
Leather goods, clothing, furniture, and tools
Explanation:
edu 2020
Answer:
The cattle kingdom was an area covering the Great Plains from Texas north to Canada, where many ranchers raised cattle, primarily "long horns" in the 1800s. A region dominated by the cattle industry and its ranches, trails, and cow towns. Success brings many into the cattle industry and increases competition. Fails when a combination of events; competition, drought, harsh winters happen.
Explanation:
