Which of the following determines the slope of the SML?
A)investors' expected returns.
B)investors' expectations regarding dividend yield.
C)investors' risk aversion.
D)the standard deviation of the investors' overall investment portfolio

Question

Quizplus · Accepted Answer

The slope of the SML is determined by investors' risk aversion. The more risk-averse investors are, the steeper the SML will be. Similarly, less risk-averse investors will result in a flatter SML. The other choices (A, B, and D) may have an impact on the expected return on an individual security, but they do not determine the slope of the SML.

Which of the Following Determines the Slope of the SML