The security market line depicts the relation between expected returns and:
A) market risk.
B) actual returns.
C) the standard deviation of expected returns.

Question

Quizplus · Accepted Answer

The security market line (SML) depicts the relationship between expected returns and market risk, where market risk is represented by beta (β). The SML is a graphical representation of the Capital Asset Pricing Model (CAPM), which shows how expected returns on investments are related to their risk relative to the market.

The Security Market Line Depicts the Relation Between Expected Returns