When using a Beta, the slope of the Security Market Line is
A) expected return of the market portfolio - riskfree return.
B) riskfree return.
C) expected return of the market portfolio/riskfree return.
D) expected return of the market portfolio.

Question

Quizplus · Accepted Answer

The slope of the Security Market Line (SML) is equal to the market risk premium, which is the expected return of the market portfolio minus the risk-free rate. This is because the SML represents the relationship between expected return and systematic risk, which is measured by beta. Therefore, the correct choice is A.

When Using a Beta, the Slope of the Security Market