What is the horizontal axis of the Security Market Line?

Question

Quizplus · Accepted Answer

The horizontal axis of the Security Market Line is Beta, which measures the volatility or systematic risk of a security compared to the overall market. The Security Market Line plots the expected rate of return for a given level of risk, as measured by beta. Thus, beta is the appropriate measure for the horizontal axis. Average Rate of Return and Standard Deviation are measures of return and risk, respectively, but they do not specifically relate to the Security Market Line. Present Value is not relevant in this context.

What Is the Horizontal Axis of the Security Market Line