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Haley Grey Sluss
on Dec 02, 2024

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The security market line:

A) relates an individual security's return to the returns of other securities in the same industry.
B) provides a picture of the risk-return tradeoff required by diversified investors.
C) has as its slope the beta of the security.
D) None of the above

Security Market Line

A representation in financial market theory plotting the expected return of an asset or a portfolio against its risk (beta), under the Capital Asset Pricing Model.

Diversified Investors

Individuals or entities that spread their investments across various asset classes and sectors to minimize risk.

Risk-Return Tradeoff

The principle that potential return rises with an increase in risk; low levels of uncertainty (risk) are associated with low potential returns, whereas high levels of uncertainty (risk) are associated with high potential returns.

  • Familiarize oneself with the interrelation between risk and return as depicted through the Security Market Line (SML).
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Myles MorganDec 03, 2024
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