The intercept point of the security market line is the rate of return that corresponds to
A)the market rate of return.
B)the beta of the market.
C)a value of one.
D)a value of zero.
E)the risk-free rate.

Question

Quizplus · Accepted Answer

The intercept point of the security market line corresponds to the risk-free rate, which represents the rate of return an investor would earn by investing in a risk-free asset. This is because the intercept point represents the expected return on a security with zero systematic risk (beta = 0), which is the same as the risk-free rate. Therefore, E is the best choice.

The Intercept Point of the Security Market Line Is the Rate