The graphical representation of the CAPM (capital asset pricing model)is called the
A)capital market line.
B)characteristic line.
C)security market line.
D)None of the options are correct.

Question

Quizplus · Accepted Answer

The graphical representation of the CAPM is called the security market line (SML). The SML is a graphical representation of the relationship between the expected return and the systematic risk of a security, as predicted by the CAPM. The SML is derived by plotting the expected return of a security (y-axis) against the beta coefficient of that security (x-axis). The slope of the SML is the market risk premium (Rm-Rf).

The Graphical Representation of the CAPM (Capital Asset Pricing Model)is