5. Which of the following is NOT true of the SML (Security Market Line)?

		The SML describes the risk vs. return relationship.
		The SML indicates that riskier investments should carry a greater expected return.
		The SML indicates that safer (less risky) investments should carry a smaller expected return.
		The SML begins at the origin.

6.

See the Security Market Line (SML) graph attached. Both of the dots shown indicate securities that means stocks and bonds) issued by the same company. Which of the two dots represents BONDS and WHY? SML: The Security Market Line Stock and Bonds of the Same Company Y-axis Which one is RETURN BONDS? % Both dots above represent securities (bonds & common stock) issued by the same company. Which of the two dots would represent BONDS? 1.0 RISK As indicated by Beta B X-axis The dot on the LEFT would represent bonds, because BONDS are MORE RISKY than stock. The dot on the LEFT would represent bonds, because BONDS are LESS RISKY than stock. The dot on the RIGHT would represent bonds, because BONDS are MORE RISKY than stock. The dot on the RIGHT would represent bonds, because BONDS are LESS RISKY than stock