The answers can be more than one

Figure 7.12 Security market line Security market 17.5 Asset 2 line Expected return E (R) 15.0 - - M Asset 1 12.5 - - - - - - -= 10.0 0.5 1.0 1.5 Risk (B) Refer to the diagram above from PBEHP 12th Ed, page 193. Which of the following statements is correct. Note there may be more than one correct. O Asset 2 is a better investment than Asset 1 O If we combine asset 1 and asset 2 in equal proportions then the average beta would be one O If Asset 2 has an IRR greater than15% then it should be accepted (according to the SML and the firm objective of maximising value.. O The slope of the SML can be calculated by referring to any two points on the SML, for example the points representing Assets 1 and 2. Slope is equal to difference in return divided by difference in beta (.175 - 125)/(1.5 -.5). O All projects plotting on the SML have an NPV of zero O Aproject with a beta of 1.3 requires a return greater than 16.5% in order to add value O A risk averse investor would invest only in the riskfree asset as it has no risk