The line of best fit for a scatter diagram showing the rates of return of an individual risky asset and the market portfolio of risky assets over time is called the
A) Security market line.
B) Capital asset pricing model.
C) Characteristic line.
D) Line of least resistance.
E) Market line.

Question

Quizplus · Accepted Answer

The line of best fit for a scatter diagram showing the rates of return of an individual risky asset and the market portfolio of risky assets over time is called the characteristic line. The characteristic line helps to determine the asset's beta, which is a measure of the asset's systematic risk relative to the market. The Security market line and Capital asset pricing model are related to the relationship between risk and return for a well-diversified portfolio, while the Line of least resistance and Market line are not relevant to this concept.

The Line of Best Fit for a Scatter Diagram Showing