The Y-axis intercept of the SML indicates the return on the individual asset when the realized return on an average stock (beta = 1.0) is zero.

Name: The Y-axis intercept of the SML indicates the return on the individual asset when the realized return on an average stock (beta = 1.0) is zero.
Brand: Quizplus
Rating: 4.9 (33 reviews)

Question

Quizplus · Accepted Answer

The Y-axis intercept of the Security Market Line (SML) represents the risk-free rate, not the return on an individual asset when the average stock's return is zero.

The Y-Axis Intercept of the SML Indicates the Return on the Individual