which of the following statements is Correct? A.)The slope of the Sml is determi
ID: 2365323 • Letter: W
Question
which of the following statements is Correct? A.)The slope of the Sml is determind by the value of beta B.)The SML shows the relationship between companies rerequired returns and their diversifiiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by the managers. C.)Suppose you plotted the returns of a given stock against those of the market, abd you found that te slope regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk for a well diversified investor, assuming investors expected the observed relationship to continue on into the future. D.) Uf investors become less reisk averse , the sloope of theSecurity market line will increase. E.) If company increases its use of debt, this is likely to cause the slope of its SML to increase indicating a higher required return on the stock.Explanation / Answer
B.)The SML shows the relationship between companies rerequired returns and their diversifiiable risks. The slope and intercept of this line cannot be influenced by a firm's managers, but the position of the company on the line can be influenced by the managers.
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