Which statement of the following statements is true?

Question

Quizplus · Accepted Answer

The Security Market Line (SML) represents the expected return of securities as a function of their systematic risk, and in equilibrium, every security and combination of securities lies on the SML. The Capital Market Line (CML) is a line representing the risk-return tradeoff available to investors for efficient portfolios, so statement A and D are incorrect. Although the SML only includes efficient portfolios, this does not mean that only efficient portfolios lie on the SML, so statement C is also incorrect.

Which Statement of the Following Statements Is True