The expected return-beta relationship of the CAPM is graphically represented by
A) the security-market line.
B) the capital-market line.
C) the capital-allocation line.
D) the efficient frontier with a risk-free asset.
E) the efficient frontier without a risk-free asset.

Question

Quizplus · Accepted Answer

The Capital Asset Pricing Model (CAPM) describes the relationship between the expected return of an investment and its risk, graphically represented by the Security Market Line (SML). The SML plots the expected return of a security or portfolio against its beta, which measures its sensitivity to market movements.

The Expected Return-Beta Relationship of the CAPM Is Graphically Represented