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 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