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...

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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 that

investors become more pessimistic about the stock market. Draw the new SML.

Answered Same DayJul 28, 2022

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

Prince answered on Jul 29 2022

73 Votes

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

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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...

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

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