The straight line passing through the risk-free rate of return on the vertical axis and the expected return-standard deviation point for the market portfolio is known as the:
A)security market line.
B)capital market line.
C)characteristic line.
D)efficient frontier.

Question

Quizplus · Accepted Answer

The straight line passing through the risk-free rate of return on the vertical axis and the expected return-standard deviation point for the market portfolio is known as the capital market line. The security market line relates the expected return of an individual security to its systematic risk, while the characteristic line relates the expected return of an individual security to the return of the market portfolio. The efficient frontier represents the set of optimal portfolios that offer the highest expected return for a given level of risk.

The Straight Line Passing Through the Risk-Free Rate of Return