The Security Market Line (SML)

question 81

Multiple Choice

The security market line (SML)

• A) can be portrayed graphically as the expected return-beta relationship.
• B) can be portrayed graphically as the expected return-standard deviation of market-returns relationship.
• C) provides a benchmark for evaluation of investment performance.
• D) can be portrayed graphically as the expected return-beta relationship and provides a benchmark for evaluation of investment performance.
• E) can be portrayed graphically as the expected return-standard deviation of market-returns relationship and provides a benchmark for evaluation of investment performance.

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Definitions:

Sales Revenue Per Unit

The amount of money generated from selling one unit of a product, before any expenses are subtracted.

Variable Cost Per Unit

The cost associated with producing one additional unit of a product, which varies with the level of production.

Contribution Margin Ratio

The contribution margin ratio calculates the proportion of sales revenue that exceeds variable costs, showing what portion of sales contributes to covering fixed costs and generating profit.

Selling Price

The amount at which a product or service is sold to customers, determined by factors such as market demand, production costs, and competition.