The Security Market Line (SML) for the United States is shown on the graph below. Suppose that the interest rate for short-term government bonds in Japan is 1.5 percent, and that research shows that investors in the Japanese market tend to be more risk-averse than investors in the U.S. market. Instructions: Use the tool provided 'SML Japan' to draw the Security Market Line for Japan. Plot only the endpoints of the line. Average expected rate of return (%) 8.0 9996655443ONNEF SO5Osononosonon 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 20 1.5 1.0 0.5 0 SML USA SML Risk level (beta) JAPAN 0.250.50 0.751.00 1.251.50 1.752.00 SML JAPAN Tools SMLJAPAN BX

The Security Market Line (SML) for the United States is shown on the graph below. Suppose that the interest rate for short-term government bonds in Japan is 1.5 percent, and that research shows that investors in the Japanese market tend to be more risk-averse than investors in the U.S. market. Instructions: Use the tool provided 'SML Japan' to draw the Security Market Line for Japan. Plot only the endpoints of the line. Average expected rate of return (%) 8.0 9996655443ONNEF SO5Osononosonon 7.5 7.0 6.5 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 20 1.5 1.0 0.5 0 SML USA SML Risk level (beta) JAPAN 0.250.50 0.751.00 1.251.50 1.752.00 SML JAPAN Tools SMLJAPAN BX

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter7: Uncertainty

Section: Chapter Questions

Problem 7.9P

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Question

The Security Market Line (SML) for the United States is shown on the graph below. Suppose that the interest rate for short-term
government bonds in Japan is 1.5 percent, and that research shows that investors in the Japanese market tend to be more risk averse
than investors in the U.S. market.
Instructions: Use the tool provided 'SML, Japan' to draw the Security Market Line for Japan. Plot only the endpoints of the line.
Average expected rate of return (%)
8.0
999655544MONNITO
S5055OSOSOSOSOSO
7.5
7.0
6.5
6.0
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
SML USA
SML
Risk level (beta)
JAPAN
0.5
0 0.250.50 0.751.00 1.251.50 1.752.00
SMLJAPAN
Tools
SML JAPAN
BX

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