The characteristic line is graphically depicted as:
A) the plot of the relationship between beta and expected return.
B) the plot of the returns of the security against the beta.
C) the plot of the security returns against the market index returns.
D) the plot of the beta against the market index returns.
E) None of these.

Question

Quizplus · Accepted Answer

The characteristic line is the plot of the security returns against the market index returns. It measures the sensitivity of a security's returns to changes in the returns of the market index. Beta and expected return can also be derived from the characteristic line, but they are not the graphical depiction of it.

The Characteristic Line Is Graphically Depicted As