Question

Which of the following is not true about the Capital Market Line, the Security Market Line, and the Security Characteristic Line?

Multiple Choice CML is the line that goes through the risk-free asset and the optimal risky portfolio

SML has beta on the x-axis

The y-axis for SCL has the excess return on the market

The slope of SCL is beta

Answer 1

The correct answer is option C i.e. The y-axis for SCL has the excess return on the market

CML is the line that goes through the risk-free asset and the optimal risky portfolio -True

SML has beta on the x-axis -True,  x-axis of SML represents risk (in terms of beta)

The y-axis for SCL has the excess return on the market - False, The SCL is plotted on a graph where the Y-axis is the excess return on a security over the risk-free return and the X-axis is the excess return of the market

The slope of SCL is beta - True, The slope of the SCL is the security's beta

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