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.
Learn more about Security Market Line (SML) on:
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Answer:
<em>Hope</em><em> </em><em>it</em><em> </em><em>helps</em><em> </em><em>u</em>
Explanation:
I think food and medicinal industries should be established in Nepal.Nepal being an agricultural country can advent the manufacture of various food items suitable in each geographical region.On the other hand,Nepal is rich in medicinal matters as the <em>Ayurvedic</em><em> </em>are much convincing and reliable.Instead of exporting such raw medicinal materials and importing the final product,we should give emphasis on its production.
Answer: Refuse the listing
Explanation:Listing is a term mainly used in trade of stocks, bonds,real and and other commodities,when a potential vendor(a person given the authority to sell or the owner who wants to sell) has specifically stated that he will not be entraining any offers from a client it is better to refuse the listing in order to prevent any dispute or conflicts which can arise due to the preferences from the vendor.
It’s education and health so yeah the person who answered this is correct:)
Answer:
Trust vs Mistrust
Explanation:
Trust vs mistrust: In psychology, the term "trust vs mistrust" is considered as one of the different stages in the psychosocial development theory which was proposed by a psychologist named Erik Erikson. This is the very first stage in the theory and usually starts from the birth of the child and lasts through eighteen months of his or her age.
According to him, if a child receives reliable, consistent, and predictable care then he or she will develop a sense of trust that would help them to form a relationship with other person and will feel secure if threatened. Whereas, if a child doesn't receive all this then he or she might develop a sense of mistrust.
In the question above, the given statement signifies that Albert has difficulty with his problem falls under the trust vs mistrust stage.
