The Y-axis intercept of the SML indicates the required return on an individual asset whenever the realized return on an average (b = 1)stock is zero.

Question

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The Y-axis intercept of the Security Market Line (SML) represents the risk-free rate, which is the required return on an asset when its beta (systematic risk measure) is zero, not the required return on an individual asset when the realized return on an average stock is zero.

The Y-Axis Intercept of the SML Indicates the Required Return