The security market line is a linear function that is graphed by plotting data points based on the relationship between which two of the following variables?
A)Risk-free rate and beta
B)Market rate of return and beta
C)Market rate of return and the risk-free rate
D)Risk-free rate and the market rate of return
E)Expected return and beta

Question

Quizplus · Accepted Answer

The security market line (SML) represents the relationship between the expected return of an asset and its beta, which measures the asset's risk relative to the market.

The Security Market Line Is a Linear Function That Is