The relationship between the required rate of return for a security and market risk is:
A)non-linear.
B)linear.
C)denoted by the capital market line.
D)concave.

Question

Quizplus · Accepted Answer

The relationship between the required rate of return for a security and market risk is linear, as depicted by the security market line (SML) according to the Capital Asset Pricing Model (CAPM). The SML graphically represents the expected return of a security as a function of its beta with the market.

The Relationship Between the Required Rate of Return for a Security