In the results of the earliest estimations of the security market line by Lintner (1965) and by Miller and Scholes (1972), it was found that the average difference between a stock's return and the risk-free rate was ________ to its nonsystematic risk.
A) positively related
B) negatively related
C) unrelated
D) related in a nonlinear fashion
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The average difference between a stock's return and the risk-free rate was positively related to its nonsystematic risk.

In the Results of the Earliest Estimations of the Security