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Question 12 Which of the following statements about Security Market Line (SML) equation r i = r RF + (r M r RF )b i

Question 12

Which of the following statements about Security Market Line (SML) equation ri = rRF + (rM rRF)bi = rRF + (RPM)bi is NOT true?

ri is the required rate of return for stock i.

rRF is the real risk-free rate.

rM is the required rate of return on a portfolio consisting of all stocks, which is called the market portfolio.

RPM is the risk premium on market portfolio. It equals to rM - rRF.

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