Which of the followings is correct? Question 11 options: a) The slope of the SML

Question

Which of the followings is correct? Question 11 options:

a) The slope of the SML is determined by the value of beta.

b) The capital market line is all linear combinations of the risk-free asset and the market portfolio.

c) We will almost always find that the beta of a diversified portfolio is less stable over time than the beta of a single security.

d) In portfolio analysis, we often use ex ante (future) returns and standard deviations, despite the fact that we are interested in ex post (historical) data.

Explanation / Answer

CORRECT ANSWER : The capital market line is all linear combinations of the risk-free asset and the market portfolio. (THUMBS UP PLEASE)

ALL OTHER ANSWERS ARE WRONG :

SLOPE OF SML IS DETERMINED BY Rp-Rf

IN PORTFOLIO ANALYSIS, WE USE HISTORICAL RETURNS TO ESTIMATE FUTURE RETURNS

BETA OF DIVERSIFIED PORTFOLIO WILL BE MORE STABLE AS IT IS A WEIGHTED AVERAGE

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.