The security market line:
A)relates an individual security's return to the returns of other securities in the same industry.
B)provides a picture of the risk-return tradeoff required by diversified investors.
C)has as its slope the beta of the security.
D)None of the above

Question

Quizplus · Accepted Answer

The security market line (SML) represents the expected return of a security or portfolio in relation to its risk (beta), illustrating the risk-return tradeoff for diversified investors. It is a graphical representation of the Capital Asset Pricing Model (CAPM), which shows how expected return varies with beta.

The Security Market Line