HomeworkLib
Question

Which one of the following statements is not true regarding the capital market line? A. The...

Which one of the following statements is not true regarding the capital market line?

A. The capital market line always has a positive slope

B. The capital market line is also called the security market line

C. All investors choose a point along the capital market line depending on their risk tolerance

D. The capital market line is the line from the risk-free asset through the market portfolio

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Ans B. The capital market line is also called the security market line

The capital market line shows return of a specific portfolio while the security market line represent the risk and return of market.

0 0
Add a comment
Know the answer?
Add Answer to:
Which one of the following statements is not true regarding the capital market line? A. The...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • which of the following statement is true regarding the selection of a portfolio from this e...

    which of the following statement is true regarding the selection of a portfolio from this e that lie on the capital allocation line? a. less risk-averse investors will invest more in the risk -free security and less in the optimal risky portfolio than more risk averse investors. b. more risk-averse investors will invest less in the optimal risky portfolio and more in the risk-free security than less risk -averse investors. c. all investors will have the same capital allocation d....

  • 5. The Capital Market Line and the Security Market Line Aa Aa E In the following...

    5. The Capital Market Line and the Security Market Line Aa Aa E In the following table, indicate whether each statement refers to the Capital Market Line (CML) or to the Security Market Line (SML). Capital Market Line (CML) Security Market Line (SML) Statement This line defines the linear relationship between the expected return on an efficient portfolio and its standard deviation. The slope of this line, TM - PRF) / OM, reflects the investors' aggregated, or market-level, expected premium...

  • 5. The Capital Market Line and the Security Market Line In the following table, check whether...

    5. The Capital Market Line and the Security Market Line In the following table, check whether each statement refers to the Capital Market Line (CML) or to the Security Market Line (SML). Statement Capital Market Line (CML) Security Market Line (SML) This line defines the linear relationship between the expected return on an efficient portfolio and its standard deviation. The slope of this line, (r̂Mr̂M – rRFrRF)/σMσM, reflects the investors’ aggregated, or market-level, expected premium for risk. This line describes...

  • In the following table, indicate whether each statement refers to the Capital Market Line (CML) or...

    In the following table, indicate whether each statement refers to the Capital Market Line (CML) or to the Security Market Line (SML). Capital Market Line (CML) Security Market Line (SML) Statement This line defines the linear relationship between the expected return on an efficient portfolio and its standard deviation The slope of this line, th risk. - TRP/OM, reflects the investors' aggregated, or market-level, expected premium for This line describes the return on an individual security as the sum of...

  • 29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected...

    29) Which of the following statements is FALSE? A) The Sharpe ratio of the portfolio tells us how much our expected retun will increase for a given increase in volatility B) We should continue to trade securities until the expected r return of each security equals its required return. Q) The required return is the expected return that is necessary to compensate for the risk that an investment will contribute to the portfolio. D) If security is required retun exceeds...

  • Question 12 Which of the following statements about Security Market Line (SML) equation “ri = rRF...

    Question 12 Which of the following statements about Security Market Line (SML) equation “ri = rRF + (rM – rRF)bi = rRF + (RPM)bi” is NOT true? ri is the required rate of return for stock i. rRF is the real risk-free rate. rM is the required rate of return on a portfolio consisting of all stocks, which is called the market portfolio. RPM is the risk premium on market portfolio. It equals to rM - rRF.

  • 10.Which one of the following statements is NOT true? Select one: A. The risk that the...

    10.Which one of the following statements is NOT true? Select one: A. The risk that the lender may not receive payments as promised is called default risk. B. Investors must pay a premium (a higher price) to purchase a security that exposes them to default risk. C. Australian government securities are assumed not have any default risk and are adopted as the best proxy measure for the risk-free rate. D. The greater the risk of an investment, the greater the...

  • 4. Changes to the security market line The following graph plots the current security market line (SML) and indi...

    4. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percenti 20.0 16.0 Return on HC's Stock 12.0 8.0 4.0 0.0 0.5 10 1.5 2.0 RISK (Betal CAPM Elements Value Risk-free rate (rar) Market risk premium (RPe) Happy Corp. stock's beta Required rate of return on...

  • 8. Changes to the security market line The following graph plots the current security market line...

    8. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) 20.0 16.0 12.0 Return on HC's Stock 1 8.0 4.0 0.0 0.5 1.0 1.5 2.0 RISK (Beta) Value CAPM Elements Risk-free rate (PRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return...

  • 8. Changes to the security market line The following graph plots the current security market line...

    8. Changes to the security market line The following graph plots the current security market line (SML) and indicates the return that investors require from holding stock from Happy Corp. (HC). Based on the graph, complete the table that follows. REQUIRED RATE OF RETURN (Percent) 20.0 16.0 12.0 Return on HC's Stock 1 8.0 4.0 0.0 0.5 1.0 1.5 2.0 RISK (Beta) Value CAPM Elements Risk-free rate (PRF) Market risk premium (RPM) Happy Corp. stock's beta Required rate of return...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT