Final answer:
Beta is the slope of the security market line, not the capital market line. Alpha measures performance against a benchmark, not the slope. An increase in financial market supply tends to lower interest rates.
Step-by-step explanation:
The correct statement is that Beta is the slope of the security market line (SML). This line represents the relationship between an asset's expected return and its risk as measured by its beta. The capital market line (CML), on the other hand, represents the risk-reward profile for efficient portfolios, and its slope is determined by the market portfolio's excess return per unit of risk. Hence, option B is incorrect because alpha is not the slope but rather the indicator of the performance differential of a security or a portfolio against the benchmark. Alpha represents the return in excess of the compensation for the assumed risk level, as predicted by the SML. Therefore, the statement 'B. Alpha is the slope of the security market line' is false.
As for the changes in the financial market that may lead to a decline in interest rates, an increase in the supply of money or credit could cause interest rates to decrease to encourage borrowing. Conversely, increased demand for money or credit could lead to higher interest rates, as lenders can command more for the loans they provide. Hence, among the given options, 'a rise in supply' will correctly lead to a decline in interest rates.