Asked by
julia romero
on Nov 07, 2024
Verified
One variable that the security market line approach depends on to estimate the expected return on a risky asset is the Marginal tax rate.
Security Market Line
A representation in the Capital Asset Pricing Model (CAPM) showing the relationship between the expected return of a security and its risk, measured by beta.
Marginal Tax Rate
The rate at which the next dollar of taxable income would be taxed, reflecting the percentage taken by taxes in the next higher tax bracket.
- Know the variables affecting the security market line (SML) approach to estimating expected return on a risky asset.
Verified Answer
BJ
Learning Objectives
- Know the variables affecting the security market line (SML) approach to estimating expected return on a risky asset.