CFA Practice Question

CFA Practice Question

Which of the following is incorrect?
A. The CML can be extended to the left of the Y-axis (region of negative standard deviation risk).
B. A firm enters a new market resulting in an increase in its business risk leading to an increase in its beta. This would cause the firm to move up along the SML.
C. Suppose Japanese investors are more risk-averse compared to US investors. Also assume that investors can purchase assets only from their own countries. Then we would expect the SML in Japan to be steeper (greater slope) compared to the US.
Explanation: Negative standard deviation is not possible.

User Contributed Comments 1

User Comment
praj24 C'est impossible
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