The Security Market Line (SML) is a straight upsloping line showing how the average expected rates of
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The Security Market Line (SML) is a straight upsloping line showing how the average expected rates of return on assets and portfolios in the economy vary with their respective levels of nondiversifiable risk as measured by beta. Arbitrage ensures that every asset in the economy should plot onto the SML. The slope of the SML reflects the investors’
dislike for nondiversifiable risk, with steeper slopes reflecting greater dislike for that risk.
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Related Book For
Economics Principles Problems And Policies
ISBN: 9780073511443
19th Edition
Authors: Campbell Mcconnell ,Stanley Brue ,Sean Flynn
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