The security market line ____.
A) is defined as the slope of a line relating an individual security's return to the returns of other securities in that firm's primary industry
B) provides a picture of the risk-return tradeoff required by diversified investors considering various risky assets
C) has as its slope the beta of the security
D) is determined by the prevailing level of risk-free interest rates minus a risk premium

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 ____