The expected return-beta relationship of the CAPM is graphically represented by
A)the security-market line.
B)the capital-market line.
C)the capital-allocation line.
D)the efficient frontier with a risk-free asset.

Question

Quizplus · Accepted Answer

The security-market line (SML) graphically represents the expected return-beta relationship of the CAPM. It shows the required return for a given level of risk, and any security that lies on or above the SML is considered to be fairly priced according to the CAPM.

The Expected Return-Beta Relationship of the CAPM Is Graphically Represented