Question: The Security Market Line (SML) relates risk to return for a given set of financial market conditions. Holding all other things constant, if investors become

The Security Market Line (SML) relates risk to return for a given set of financial market conditions. Holding all other things constant, if investors become more risk averse, which of the following changes would be most likely to occur?

a. Beta would increase

b. The slope of the SML would decrease.

c. The risk premium on stocks would increase.

d. The risk free rate would increase.

e. All of the changes above would occur.

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