Firms make their production decisions based on consumers' needs and wants, that is, there is only supply of goods and services because there is a demand for it.
The Egypt's main religion is Polytheistic
Not much is known about how the earliest civilizations adapted to their environments except through their cultural habits (i.e. religion, games, etc). The Mayans took advantage of the surrounding rain forests and developed a very heavy agricultural and farming civilization, focusing in the cultivation of maize, beans, squash, peppers, avocado, and other important foods. They created a system for tearing down the rain forest in order to make room for their fields and left the watering of the plants up to the gods as they believed that the sun and rain were entirely divine. The Aztecs, however, settled in a more marshy land that was difficult to cultivate. Instead, they relied on military power and strength to conquer other civilizations and steal their food to keep their civilization alive. They did a bit of growing on their own, but not to the same scale as the Mayans, developing water ways and canals to transport goods from conquered cities to their capital.
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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D because soldiers want to have a good impression in front of their drill sargents
