The security market line (SML) is
A)the line that describes the expected return-beta relationship for well-diversified portfolios only.
B)also called the capital allocation line.
C)the line that is tangent to the efficient frontier of all risky assets.
D)the line that represents the expected return-beta relationship.

Question

Quizplus · Accepted Answer

The security market line (SML) represents the expected return-beta relationship for all risky assets, not just well-diversified portfolios. It is not the same as the capital allocation line or tangent to the efficient frontier. Therefore, the best choice is D - the line that represents the expected return-beta relationship.

The Security Market Line (SML) Is