Which of the following is least likely to move a firm's position to the right on the Security Market Line (SML)?
A) An increase in the firm's beta
B) Adding more financial debt to the firm's balance sheet relative to equity
C) Changing the business strategy to include new product lines with more volatile expected cash flows
D) Investors perceive the stock as being more risky
E) An increase in the risk-free required rate of return.

Question

Quizplus · Accepted Answer

An increase in the risk-free required rate of return shifts the entire SML line upwards, not the firm's position relative to the SML.

Which of the Following Is Least Likely to Move a Firm's