Financial Management Chapter 13

What is the intercept of the security market line (SML)?
The risk free rate
The market rate of return
The market-risk premium
Beta

The risk-free rate

Historical return data indicates that as the number of securities in a portfolio increases, the standard deviation of returns for the portfolio:

Declines

According to the CAPM, which of the following events would affect the return on a risky asset?
A fire in the company's plant
Federal reserve actions that affects the economy
a strengthening of the country's currency
a change in the company's leadership
a

Federal reserve actions that affects the economy
a strengthening of the country's currency
a change in the yield on T-bills

What is the slope of the security market line (SML)?
The risk-free rate of return
The expected return on the market plus the risk-free rate of return
The expected return on market
The market-risk premium

The market-risk premium

True or False: Systematic risk can be eliminate by diversification

False

What is the intercept of the security market line (SML)?
The risk-free rate
The market-risk premium
The market rate of return
Beta

The risk-free rate