The security market line depicts the graphical relationship between which two of the following?
I. expected return
II. surprise return
III. systematic risk
IV. unsystematic risk
A) I and III
B) I and IV
C) II and III
D) II and IV
E) none of the above

Question

Quizplus · Accepted Answer

The security market line depicts the relationship between expected return (I) and systematic risk (III), as it shows the expected return that an investor should receive for taking on a given level of systematic risk. Surprise return (II) and unsystematic risk (IV) are not directly represented on the security market line.

The Security Market Line Depicts the Graphical Relationship Between Which