The Security Market Line (SML) Is

question 76

Multiple Choice

The security market line (SML) is

• A) the line that describes the expected return-beta relationship for well-diversified portfolios only.
• B) also called the capital allocation line.
• C) the line that is tangent to the efficient frontier of all risky assets.
• D) the line that represents the expected return-beta relationship.
• E) All of the options.

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Definitions:

Compound Interest

Interest calculated on the initial principal of a deposit or loan, as well as on the accumulated interest of previous periods.

Cash Inflow

The movement of money into an entity, often from operations, investments, and financing, reflecting the increase in cash and cash equivalents.

Earnings Rate

The percentage of return on an investment or the rate at which a company or asset is generating income.

Internal Rate Of Return

A metric used in financial analysis to estimate the profitability of potential investments.