The CAL provided by combinations of 1-month T-bills and a broad index of common stocks is called the ________.
A) SML
B) CAPM
C) CML
D) total return line

Question

Quizplus · Accepted Answer

The CAL provided by combinations of 1-month T-bills and a broad index of common stocks is called the Capital Market Line (CML), which shows the expected return for a given level of risk. The Security Market Line (SML) represents the expected return of an individual security based on its beta, while the Capital Asset Pricing Model (CAPM) is used to calculate the expected return of an individual security based on its systematic risk. The total return line is not a commonly used financial term.

The CAL Provided by Combinations of 1-Month T-Bills and a Broad