For a set of individual companies being plotted, the difference between the Capital Market Line graph and the Security Market Line graph is
A) the scale for rate of return
B) the measurement for risk
C) the intercept on the vertical axis
D) the measurement of return

Question

Quizplus · Accepted Answer

The Capital Market Line (CML) plots the risk (measured by standard deviation) versus return of efficient portfolios, while the Security Market Line (SML) plots risk (measured by beta) versus return of individual securities. Thus, the difference lies in the measurement for risk.

For a Set of Individual Companies Being Plotted, the Difference