Which of the following statements is CORRECT?
A) If the risk-free rate rises, then the market risk premium must also rise.
B) If a company's beta is halved, then its required return will also be halved.
C) If a company's beta doubles, then its required return will also double.
D) The slope of the security market line is equal to the market risk premium, (rM − rRF).
E) Beta is measured by the slope of the security market line.

Question

Quizplus · Accepted Answer

The slope of the security market line (SML) is indeed equal to the market risk premium, which is the difference between the expected market return (rM) and the risk-free rate (rRF).

Which of the Following Statements Is CORRECT