The Security Market Line Does Not

question 28

Multiple Choice

The security market line does not

• A)indicate the relationship between risk and return
• B)relate the market return and beta to a stock's return
• C)identify the optimal portfolio for the investor
• D)use beta coefficients as a measure of risk

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Definitions:

Alternative Proposed Use

A potential use of resources or assets under consideration as an option different from their current application.

Cash

Money in the form of bills or coins, used as a medium of exchange; in accounting, it often refers to assets that are readily available for use.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.

Alternative Use

Alternative use pertains to the different ways in which an asset or resource can be utilized apart from its current or primary purpose.