The Security Market Line depicts the inverse relationship between the average expected rates of
return and risk levels of ﬁnancial assets.

Question

Quizplus · Accepted Answer

The Security Market Line (SML) depicts the positive relationship between the expected return of investments and their beta (systematic risk), not an inverse relationship. Higher risk (beta) is associated with higher expected returns according to the Capital Asset Pricing Model (CAPM).

The Security Market Line Depicts the Inverse Relationship Between the Average