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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Answer:
Please put the sentence so that I can answer.
Explanation:
Because, without a sentence how is one to answer a question missing pieces of information?
Creator of the Assembly line —> Henry Ford
First Major Mail-Order catalog —> Tiffany and Company
Major seller of mail-order homes —> Sears
First mail order catalog seen in the U.S —> Montgomery Ward
President of General Motors —> Alfred Sloan
First mass produced vehicle in the U.S —> Model T
Answer:
Males and female frogs often have slight differences on their hands and feet. Male frogs often have small differently coloured and/or more roughly textured patches on their hands, especially on the insides of their thumbs. Often tricky to see, in the breeding season they often turn dark and become raised.
Spleen - brown, bean shaped organ found below the stomach on the left side of your frog. Its function is to store blood cells.
Organ in the frog's circulatory system that makes, stores, and destroys blood cells. Cloaca - Organ through which the products of the frogs digestive and urogenital system pass when discharged from the body.
Explanation:
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