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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The United Kingdom is represented by the number 44.
Answer:
Social Issues and Community Interactions
This chapter examines social issues involved in the siting and operation of waste-incineration facilities (such as incinerators and industrial boilers and furnaces), including possible social, economic, and psychological effects of incineration and how these might influence community interactions and estimates of health effects. Issues with respect to perceptions and values of local residents are also considered. In addition, this chapter addresses risk communication issues and approaches for involving the general public to a greater extent in siting and other decisions concerning incineration facilities. The committee recognized at the outset of its study that the social, economic, and psychological effects for a particular waste-incineration facility might be favorable, neutral, or adverse depending on many site-specific conditions and characteristics. However, the current state of understanding for many issues considered in this chapter is such that little or no data specific to waste incineration were available for analysis by the committee. In such cases, the committee identified key issues that should be addressed in the near future.
The social, psychological, and economic impacts of incineration facilities on their locales are even less well documented and understood than the health effects of waste incineration. When environmental-impact assessments are required for proposed federal or state actions, they typically must include socioeconomic-impact assessments, but the latter are often sketchy at best. They also might be given short shrift in the decision-making process (Wolf 1980; Freudenburg 1989; Rickson et al. 1990). Furthermore, these socioeconomic assessments attempt to be prospective—that is, they assess the likely effects of proposed actions. Little research has been done to evaluate systematically the socioeco-
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Suggested Citation:"Social Issues and Community Interactions." National Research Council. 2000. Waste Incineration and Public Health. Washington, DC: The National Academies Press. doi: 10.17226/5803.×
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nomic impacts of controversial waste-treatment or waste-disposal facilities that have been in place for several years or more (Finsterbusch 1985; Seyfrit 1988; English et al. 1991; Freudenburg and Gramling 1992). Moreover, the committee is not aware of any studies of the effects of removing an established incinerator. One reason for the lack of cumulative, retrospective socioeconomic-impact research is the lack of sufficient data. Although incineration facilities must routinely monitor and record emissions of specified pollutants, health-monitoring studies before or after a facility begins operation are only rarely performed, and periodic studies of the socioeconomic impacts of a facility over time are virtually nonexistent, partly because of methodological problems (Armour 1988) and the absence of regulations that necessitate continued monitoring of socioeconomic impacts.
Explanation:
