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A stock with an actual return that lies above the security market line has: a return equivalent to the level of risk assumed. less systematic risk than the overall market more risk than that warranted by CAPM. more systematic risk than the overall market. a higher return than expected for the level of risk assumed.

Sagot :

A higher return than expected for the level of risk assumed. SML depicts different combination of risk and return. In other words, it shows the expected return for a certain level of risk.

A return can be expressed nominally as the change in dollar value of an investment over time. A return can also be expressed as a percentage derived from the ratio of profit to investment. Returns can also be presented as net results (after fees, taxes, and inflation) or gross returns that do not account for anything but the price change. It even includes a 401(k) investment.

  • The price change over time of an asset, investment, or project is called a return. This change can be expressed as a percentage change or as a change in price.
  • A gain is referred to as a return, while a loss is referred to as a return.
  • For comparison purposes, returns are frequently annualized, whereas a holding period return calculates the gain or loss over the entire holding period of an investment.
  • While the nominal return is only interested in price change, the real return takes into account inflation and other external factors.
  • Dividend and interest payments, as well as changes in price, are all included in a stock's total return.
  • Fundamental analysis can make use of a number of different return ratios.

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