Which of the following represents a plot of the relation between expected return and systemic risk?
A) The beta coefficient
B) The covariance of returns line
C) The security market line
D) The variance

Question

Quizplus · Accepted Answer

The security market line (SML) is a graphical representation that shows the relationship between expected return and systemic risk. It plots the expected return for a given level of risk, as measured by beta, where the slope of the line represents the market risk premium. The SML is an essential tool for pricing securities and determining an appropriate required rate of return.

Which of the Following Represents a Plot of the Relation