Which of the following statements is CORRECT? ?
A. ?The slope of the SML is determined by the value of beta.
B. ?The SML shows the relationship between companies' required returns and their diversifiable 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 its managers.
C. ?Suppose you plotted the returns of a given stock against those of the market, and you found that the slope of the regression line was negative. The CAPM would indicate that the required rate of return on the stock should be less than the risk-free rate for a well diversified investor, assuming investors expect the observed relationship to continue on into the future.
D. ?If investors become less risk averse, the slope of the Security Market Line will increase.
E. ?If a 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.
Answer: C
You might also like to view...
The costs associated with internally developed goodwill are capitalized
Indicate whether the statement is true or false
The following information is available on a depreciable asset owned by Mutual Savings Bank: Purchase dateJuly 1, Year 1Purchase price$82,600?Salvage value$11,400?Useful life8 yearsDepreciation methodstraight-lineThe asset's book value is $64,800 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $6400 rather than the original estimate of $11,400. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:
A. $1958.33 B. $2433.33 C. $4866.67 D. $2700.00 E. $2366.37
For a firm, the receivables turnover is 33.5, the closing inventory is $120,000, and the accounts payable balance is $52,000. Assuming there are 360 days in a year, the receivables collection period is:?
A. 19.23 days.? B. ?13.77 days. C. ?14.56 days. D. ?12.25 days. E. ?10.75 days.
A red clause in a letter of credit is a promise by the advising bank to reimburse the seller's bank for loans made to the seller
Indicate whether the statement is true or false