The security market line (SML)
A) can be portrayed graphically as the expected return-beta relationship.
B) can be portrayed graphically as the expected return-standard deviation of market-returns relationship.
C) provides a benchmark for evaluation of investment performance.
D) can be portrayed graphically as the expected return-beta relationship and provides a benchmark for
E) can be portrayed graphically as the expected return-standard deviation of market-returns relationship and

Question

Quizplus · Accepted Answer

The SML is a measure of the expected return-beta relationship (the CML is a measure of expected returnstandard deviation of market returns). The SML provides the expected return-beta relationship for "fairly priced"securities; thus if a portfolio manager selects securities that are underpriced and produces a portfolio with apositive alpha, this portfolio manager would receive a positive evaluation.

The Security Market Line (SML)