What is the difference between the security market line (SML)and the capital market line (CML)?
A)SML prices total risk where CML prices non-systematic risk
B)SML prices systematic risk where CML prices total risk
C)SML prices total risk where CML prices systematic risk
D)SML prices systematic risk where CML prices non-systematic risk

Question

Quizplus · Accepted Answer

SML (Security Market Line) prices systematic risk, which is the risk inherent to the entire market or market segment. CML (Capital Market Line), on the other hand, represents portfolios that optimally combine risk and return, but it is based on the total risk of the portfolio, as it shows the risk-return trade-off for efficient portfolios.

What Is the Difference Between the Security Market Line (SML)and