In a multiple-factor situation, the asset pricing line
A) becomes curved with a decreasing, positive slope.
B) contradicts the CAPM.
C) is still linear.
D) becomes flat.

Question

Quizplus · Accepted Answer

The asset pricing line, also known as the security market line, remains linear even in a multiple-factor situation. This means that the relationship between the required rate of return and the risk of an asset remains proportional, and the risk can still be measured by beta.

In a Multiple-Factor Situation, the Asset Pricing Line