The Security Market Line (SML)relates Risk to Return, for a Given

Multiple Choice

The Security Market Line (SML) relates risk to return, for a given set of market conditions. If risk aversion increases, which of the following would most likely occur?

A) The market risk premium would increase.
B) The risk-free rate would increase.
C) The slope of the SML would increase.
D) Both a & c
E) All of the above