Multiple choice question.
It depicts the relationship between expected return and the standard deviation of returns.
It depicts the relationship between systematic risk and unsystematic risk.
It depicts the relationship between the return on the S&P 500 and an individual security's return.
It is a graphical depiction of the capital asset pricing model. It shows the relationship between expected return and beta.
1 answer
The correct answer is:
It is a graphical depiction of the capital asset pricing model. It shows the relationship between expected return and beta.
The Security Market Line (SML) represents the expected return of a security as a function of its systematic risk, measured by beta, according to the Capital Asset Pricing Model (CAPM).
