Which of the following is false about the security market line (SML) derived from the APT? A) The SML has a downward slope. B) The SML for the APT shows expected return in relation to portfolio standard deviation. C) The SML for the APT has an intercept equal to the expected return on the market portfolio. D) The benchmark portfolio for the SML may be any well-diversified portfolio. E) The SML has a downward slope, shows expected return in relation to portfolio standard . deviation, and has an intercept equal to the expected return on the market portfolio.

Question

Quizplus · Accepted Answer

The benchmark portfolio does not need to be the (unobservable) market portfolio under the APT, but can be any well-diversified portfolio. The intercept still equals the risk-free rate.

Which of the Following Is False About the Security