Asked by Jeanette Avila on Jun 24, 2024
Verified
The SML represents a:
A) condition of a volatile market.
B) stable market condition.
C) condition of stable equilibrium.
D) shift in market conditions.
SML
The Security Market Line (SML) is a graphical representation of the Capital Asset Pricing Model (CAPM), showing the relationship between the expected return of investments and their risk as measured by beta.
Stable Equilibrium
A condition in which a system tends to return to its original state after a disturbance, indicating stability and balance.
- Comprehend the impact of alterations in the risk-free rate on the Security Market Line (SML).
Verified Answer
DM
Desak Made Prathivi WulandariJun 28, 2024
Final Answer :
C
Explanation :
SML stands for Security Market Line which is a graphical representation of the expected return of a stock in relation to its risk. The line represents the equilibrium point between the expected return and risk of a stock in a stable market condition. Therefore, the correct answer is option C - condition of stable equilibrium.
Learning Objectives
- Comprehend the impact of alterations in the risk-free rate on the Security Market Line (SML).