The line plotted to fit observations of a stock's returns versus the market's returns determines the:
A)security market line.
B)Beta of the stock.
C)market risk premium.
D)capital asset pricing model.

Question

Quizplus · Accepted Answer

The line plotted to fit observations of a stock's returns versus the market's returns is the line of best fit, which measures the stock's sensitivity to market movements, also known as its beta. Therefore, the correct answer is B. The security market line, market risk premium, and capital asset pricing model are all related to the calculation and interpretation of beta, but they are not determined by the line of best fit itself.

The Line Plotted to Fit Observations of a Stock's Returns