The Security Characteristic Line (SCL) Associated with the Single-Index Model

question 62

Multiple Choice

The security characteristic line (SCL) associated with the single-index model is a plot of

• A) the security's returns on the vertical axis and the market index's returns on the horizontal axis.
• B) the market index's returns on the vertical axis and the security's returns on the horizontal axis.
• C) the security's excess returns on the vertical axis and the market index's excess returns on the horizontal axis.
• D) the market index's excess returns on the vertical axis and the security's excess returns on the horizontal axis.
• E) the security's returns on the vertical axis and Beta on the horizontal axis.

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Definitions:

Economic Efficiency

A state in which resources are ideally distributed to best meet the needs of every person or entity, reducing waste and inefficiency to a minimum.

Gains From Trade

The benefits that parties obtain from engaging in voluntary exchange of goods or services.

Free Markets

Economic systems where prices for goods and services are determined by the open market and consumers, with minimal government intervention.

Opportunity Costs

The cost of foregone alternatives, or what is given up to engage in one activity instead of another.