The Graph of the Relationship Between Expected Return and Beta

question 82

Multiple Choice

The graph of the relationship between expected return and beta in the CAPM context is called the ________.

• A) CML
• B) CAL
• C) SML
• D) SCL

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Definitions:

Simple Rate of Return

A method of investment appraisal that calculates the annual incremental net operating income as a percentage of the initial investment.

Cash Operating Costs

Costs that a company incurs during its normal business operations, paid in cash, such as wages, utilities, and rent.

Pretax Return

The income generated by a business before any tax obligations are deducted.

Net Present Value

A financial measure that determines the net present value by subtracting the present value of cash outlays from cash inflows over a specified timeframe.