Use the following three statements to answer this question:
I.The capital market line (CML)depicts the highest attainable expected return for any given risk level that includes only efficient portfolios.
II.The security market line (SML)depicts the required rate of return for any given risk level that includes only individual securities.
III.The Security Market Line (SML)measures the price of systematic risk.
A)I, II and III are correct.
B)I, II and III are incorrect.
C)I and III are correct, II is incorrect.
D)I is incorrect, II and III are correct.

Question

Quizplus · Accepted Answer

Statement I is correct as the capital market line (CML) is a line on a graph that represents the highest expected return for a given level of risk, which includes only efficient portfolios. Statement II is incorrect as the security market line (SML) shows the expected return of an individual security for a given level of systematic risk. Lastly, statement III is correct as the SML measures the price of systematic risk, making choice C the best answer.

Use the Following Three Statements to Answer This Question