The security market line (SML)graphs the expected relationship between
A) Business risk and financial risk
B) Systematic risk and unsystematic risk
C) Risk and return
D) Systematic risk and unsystematic return
E) None of the above

Question

Quizplus · Accepted Answer

The security market line (SML) is a graphical representation that shows the expected relationship between risk (measured by systematic risk) and return in the capital markets. It provides a benchmark for evaluating investment performances and helps investors to determine whether a particular investment offers a fair return for its risk level. Therefore, the correct answer is C as the SML graphs the expected relationship between risk and return.

The Security Market Line (SML)graphs the Expected Relationship Between