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Shifts in the security market line Assume that the risk-free rate, RF, is currently 5%, the market return, m, is 9%, and asset A has a beta, ba, of 1.15. a. Use CAPM to estimate the required return, A, on asset A. Which of the following graphs represents the security market line (SML) and the required return for asset A? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering Re and im to 3% and 7%, respectively Which of the following graphs represents the new SML and shows the new required return for asset A? C. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to 11%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new required return for asset A? a. The required rate of return on asset Ais %. (Round to two decimal places.) Which of the following graphs represents the security market line (SML) and the required return for asset A? (Select the best answer below.) . @B Security Market Line Security Market Line Required Retur,r(%) Aequired Relum 10%) Noort Asset A 65 ES Nondiversifiable Risk b Asset A 0.5 16 Nondiversifiable Risk b C. D. Security Market Line Security Market Line Q 25 Shifts in the security market line Assume that the risk-free rate, Re, is currently 5%, the market return, Im, is 9%, and asset A has a beta, ba, of 1 15. a. Use CAPM to estimate the required return, A, on asset A Which of the following graphs represents the security market line (SML) and the required return for asset A? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering Re and to 3% and 7%, respectively. Which of the following graphs represents the new SML and shows the new required return for asset A? C. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to 11%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new required return for asset A? C. Security Market Line Q OD Security Market Line CA Required Return, r (%) (%)'uma pabes Asset A Asset A 0.5 145 Nondiversifiable Risk b 015 15 Nondiversifiable Risk, b b. If as a result of recent economic events, inflationary expectations have declined by 2% lowering Re and r. to 3% and 7%, respectively, the required rate of return on asset Ais 1% (Round to two decimal places.) Which of the following graphs represents the new SML (blue line) and shows the new required return for asset A(Select the best answer below.) DB A @ Security Marketing Security Market line Click to select your answers) Shifts in the security market line Assume that the risk-free rate, Re, is currently 5%, the market return, im, is 9%, and asset A has a beta, ba, of 1.15. a. Use CAPM to estimate the required return, ta on asset A. Which of the following graphs represents the security market line (SML) and the required return for asset A? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering Rp and/, to 3% and 7%, respectively. Which of the following graphs represents the new SML and shows the new required C. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2% to 11%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new required Which of the following graphs represents the new SML (blue line) and shows the new required return for asset A? (Select the best answer below) A. KD B. Security Market Line Security Market Line CA Required Retum, r(%) organa Required Retum, r (56) PMA OD OSOBA Asset A Asset A 0.5 15 Nondiversifiable Risk, 6 los 16 Nondiversifiable Risk, b 3 D. Security Market Line Security Market Line (%) Click to select your answeris) Shifts in the security market line Assume that the risk-free rate, RF, is currently 5%, the market return, Im, is 9%, and asset A has a beta, ba, of 1.15. a. Use CAPM to estimate the required return, Ta, on asset A Which of the following graphs represents the security market line (SML) and the required return for asset A? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering RF and Im to 3% and 7%, respectively. Which of the following graphs represents the new SML and shows the C. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to 11%. Ignoring the shift in part b, which of the following graphs shows the new SML and the 0.5 1.5 2 0 0.5 1 Nondiversifiable Risk, b 1.5 2 Nondiversifiable Risk, b o c. Security Market Line Q OD. Security Market Line LA Required Return, r(%) Required Retum, r(%) Asset A Asset A 2 2 0.5 15 Nondiversifiable Risk, b 0.5 11 15 Nondiversifiable Risk, b C. As a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to 11%, then the required rate of return on asset Ais [% (Round to two decimal places.) Ignoring the shift in part b, which of the following graphs shows the new SML (blue line) and the new required return for asset A? (Select the best answer below.) Click to select your answer(s). Shifts in the security market line Assume that the risk-free rate, Rp. is currently 5%, the market return, rm is 9%, and asset A has a beta, bA. of 1.15. a. Use CAPM to estimate the required return, A. on asset A. Which of the following graphs represents the security market line (SML) and the required return for asset A? b. Assume that as a result of recent economic events, inflationary expectations have declined by 2%, lowering RF and rm to 3% and 7%, respectively. Which of the following graphs represents the new SML and shows the new c. Assume that as a result of recent events, investors have become more risk averse, causing the market return to rise by 2%, to 11%. Ignoring the shift in part b, which of the following graphs shows the new SML and the new re OA. OB Security Market Line Security Market Line @ Required Return, t("%) Required Return, ("%) Asset A Asset A 0.5 1.5 Nondiversifiable Risk, b 45 Nondiversifiable Risk b D . Security Market Line Security Market Line e Required Return, 1("%6) Required Return, 1(%) Asset A Asset A 0.5 Nondiversifiable Risk b 05 115 Nondiversifiable Risk b Click to select your