Both assets A and B plot on the SML.Asset A has an expected return of 15% and a beta of 1.7.Asset B has an expected return of 12% and a beta of 1.1.What is the slope of the security market line?
A)5.0%
B)6.5%
C)11.5%
D)cannot be determined from this information.

Question

Quizplus · Accepted Answer

The slope of the Security Market Line (SML) is the market risk premium, calculated as the difference in expected returns divided by the difference in betas: (15% - 12%) / (1.7 - 1.1) = 5.0%.

Both Assets a and B Plot on the SML