Which of the following statements is incorrect?
A) The security market line shows the relationship between risk and return for any stock or portfolio.
B) The y-intercept of the security market line represents the return on the risk-free asset.
C) The measure of risk used in creating the security market line is the standard deviation.
D) none of these choices are incorrect.

Question

Quizplus · Accepted Answer

The measure of risk used in creating the Security Market Line (SML) is beta (β), not the standard deviation. The SML relates the expected return of a security to its beta with the market, not its total risk as measured by standard deviation.

Which of the Following Statements Is Incorrect