Examples of security market line in the following topics:
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- The security market line is useful to determine if an asset being considered for a portfolio offers a reasonable expected return for risk.
- The CAPM is a model for pricing an individual security or portfolio.
- For individual securities, the security market line (SML) and its relation to expected return and systematic risk (beta) depicts an individual security in relation to their security risk class .
- Individual securities are plotted on the SML graph.
- The security market line depicts the the return on a security relative to its own risk.
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- A financial market or system is a market in which people and entities can trade financial securities, commodities, and other fungible items.
- A financial market or system is a market in which people and entities can trade financial securities, commodities, and other fungible items .
- Securities include stocks and bonds, and commodities include precious metals or agricultural goods.
- There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded).
- Equity markets are the most closely followed of the financial markets.
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- A capital market is a financial exchange for the buying and selling of long-term debt and equity-backed securities.
- A capital market is a financial exchange for the buying and selling of long-term debt and equity-backed securities ( ).
- A key division within the capital markets is between the primary markets and secondary markets.
- In the secondary markets, existing securities are sold and bought among investors or traders, usually on an exchange, over-the-counter, or elsewhere.
- A key difference is that with a regular bank loan, the lending doesn't take the form of resalable security like a share or bond that can be traded on the markets.
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- A perfectly competitive firm faces a demand curve is a horizontal line equal to the equilibrium price of the entire market.
- In a perfectly competitive market the market demand curve is a downward sloping line, reflecting the fact that as the price of an ordinary good increases, the quantity demanded of that good decreases.
- Price is determined by the intersection of market demand and market supply; individual firms do not have any influence on the market price in perfect competition.
- Once the market price has been determined by market supply and demand forces, individual firms become price takers.
- The demand curve for a firm in a perfectly competitive market varies significantly from that of the entire market.The market demand curve slopes downward, while the perfectly competitive firm's demand curve is a horizontal line equal to the equilibrium price of the entire market.
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- Capital markets in the United States provide the lifeblood of capitalism.
- Companies turn to them to raise funds needed to finance the building of factories, office buildings, airplanes, trains, ships, telephone lines, and other assets; to conduct research and development; and to support a host of other essential corporate activities.
- The stock market and other capital markets allow investors to buy and sell stocks continuously.
- The markets play several other roles in the American economy as well.
- These markets owe their success in part to computers, but they also depend on tradition and trust -- the trust of one broker for another, and the trust of both in the good faith of the customers they represent to deliver securities after a sale or to pay for purchases.
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- The Securities and Exchange Commission (SEC), which was created in 1934, is the principal regulator of securities markets in the United States.
- Before 1929, individual states regulated securities activities.
- But the stock market crash of 1929, which triggered the Great Depression, showed that arrangement to be inadequate.
- The Securities Act of 1933 and the Securities Exchange Act of 1934 consequently gave the federal government a preeminent role in protecting small investors from fraud and making it easier for them to understand companies' financial reports.
- The Commodity Futures Trading Commission oversees the futures markets.
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- With market forces unable to address such problems, many environmentalists suggested that government has a moral obligation to protect the earth's fragile ecosystems -- even if doing so requires that some economic growth be sacrificed.
- The EPA sets and enforces tolerable limits of pollution, and it establishes timetables to bring polluters into line with standards; since most of the requirements are of recent origin, industries are given reasonable time, often several years, to conform to standards.
- Among other things, the legislation incorporated an innovative market-based system designed to secure a substantial reduction in sulfur dioxide emissions, which produce what is known as acid rain.
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- When a market achieves perfect equilibrium there is no excess supply or demand, which theoretically results in a market clearing.
- This equilibrium point is represented by the intersection of a downward sloping demand line and an upward sloping supply line, with price as the y-axis and quantity as the x-axis .
- While this concept of market clearing resonates well in theory, the actual execution of markets is very rarely perfect.
- Another classic criticism of market clearing is the way in which the labor market functions.
- In the 1930's, during the worst depression recorded in the United States, the labor market did not clear the way economic theories of market clearing would assume it would.
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- Open market operations (OMOs) are the purchase and sale of securities in the open market by a central bank.
- On a general level, OMO are the purchase and sale of securities in the open market by a central bank, as a means of controlling the money supply and the related prevailing interest rate.
- They are under the oversight of the Federal Reserve Open Market Committee (FOMC).
- By buying and selling US Treasury bills on the open market, the Federal Reserve hopes to change their yields, which will then affect the interest rates in the broader market.
- Discuss the use of open market operations to implement monetary policy
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- The Federal Open Market Committee is responsible for conducting open market operations in order to achieve a target interest rate.
- To lower the federal funds rate, for example, the Fed buys securities on the open market, increasing the money supply.
- In order to raise the federal funds rate, on the other hand, the Fed sells securities and thereby reduces the money supply.
- This involves meeting the demand for money at the target interest rate by buying and selling government securities or other financial instruments.
- Describe the structure and operations of the Federal Open Market Committee (FOMC)