Assume you own a portfolio of diverse securities which are each correctly priced.Given this, the reward-to-risk ratio:
A)for the portfolio must equal 1.0.
B)for the portfolio must be less than the market risk premium.
C)for each security must equal zero.
D)of each security is equal to the risk-free rate.
E)of each security must equal the slope of the security market line.

Question

Quizplus · Accepted Answer

The reward-to-risk ratio of each security in a correctly priced portfolio must equal the slope of the security market line, which represents the market risk premium per unit of systematic risk.

Assume You Own a Portfolio of Diverse Securities Which Are