Draw a diagram of the SML. Label the axes and the intercept.a) Assume that the risk free rate shift...

Question

Draw a diagram of the SML. Label the axes and the intercept.a) Assume that the risk free rate shift upward. Draw the new SML.b) Assume that the risk free rate remain the same as before the change in (a) but thatinvestors become more pessimistic about the stock market. Draw the new SML.

Prince · Accepted Answer

SML:
	Expected Return	SML
	E(R)	Market Portfolio
	Rf
	0	1	Beta
a. 
SML:
	Expected Return	SML
	E(R)	Market Portfolio
	Rf2
	Rf1
	0	1		Beta
b. 
SML:
	Expected Return	SML
	E(R)2	New Market Portfolio
		Market Portfolio
	E(R)1
	Rf
	0	1	Beta

Draw a diagram of the SML. Label the axes and the intercept. a) Assume that the risk free rate shift upward. Draw the new SML. b) Assume that the risk free rate remain the same as before the change in...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment