The linear relation between an asset's expected return and its beta coeﬃcient is the:
A) Reward to risk ratio.
B) Portfolio weight.
C) Portfolio risk.
D) Security market line.
E) Market risk premium.

Question

Quizplus · Accepted Answer

The linear relation between an asset's expected return and its beta coefficient is known as the Security Market Line (SML). The SML depicts the expected return on a particular asset or portfolio as it relates to its risk or beta. The slope of the SML is the market risk premium, which measures the expected return for an additional unit of risk in the overall market or portfolio. Therefore, the correct answer is D, security market line.

The Linear Relation Between an Asset's Expected Return and Its