Question

The Security Market Line Group of answer choices usually has a negative slope. shows the highest...

The Security Market Line

Group of answer choices

usually has a negative slope.

shows the highest historical return earned by an asset.

is a minimum standard of return for an asset.

is calculated by taking the risk-free rate of return and multiplying it by beta.

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Homework Answers

Answer #1

The Correct option is D

Security Market line is a Graphical figure of the Capital asset pricing Model equation, The SML Line starts from the Y-Axis as the difference between the Origin and the Y-axis is the risk free return that an investor gets and it moves to upward direction when the beta is increased as it shows that an investor would get higher return if they invest in securities with higher beta.

The equation of SML Line is

Expected return = Rf + B ( Rm - Rf)

where, Rf is risk free return,
B is beta

Rm is market return

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