Other things held constant, if investors become less risk averse, the new security market line (SML) would _____.
A)not be affected
B)shift down
C)shift up
D)have a steeper slope
E)have a less steep slope

Question

Other things held constant, if investors become less risk averse, the new security market line (SML) would _____. 
A)not be affected
B)shift down
C)shift up
D)have a steeper slope
E)have a less steep slope

Quizplus · Accepted Answer

If investors become less risk averse, they require a lower risk premium for taking on additional risk, which results in a less steep slope of the Security Market Line (SML).

Other Things Held Constant, If Investors Become Less Risk Averse