Considered special case of the security market line

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Reference no: EM131923906

1) The Capital Market Line is considered an equilbrium model in that when an asset is not on the line, market forces come into play to drive the asset back onto the CML. (True or False)

2) The Capital Market Line is considered a special case of the Security Market Line. This is caused by risk being difficult to measure. (True or False)

3) Both the Capital Market Line and the Security Market Line are "snap shots in time" as the risk free rate can change over time as well as the price of risk. (True or False)

4) Beta (B) is a measure of nonsystematic risk. As such, if a security has a beta greater than one, the security is considered more risky than the 'market' in general.

(True or False)

5) Beta (B) for a security has a definition. It is defined as: the covariance of the return on the security and the return on the general 'market' divided by the variance of the return on the general 'market'. (True or False)

Reference no: EM131923906

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