Asked by Azriel Gamez on Jul 23, 2024
Verified
The intercept point of the security market line is the rate of return which corresponds to:
A) The risk-free rate of return.
B) The market rate of return.
C) A value of zero.
D) A value of 1.0.
E) The beta of the market.
Security Market Line
A line in the Capital Asset Pricing Model (CAPM) that represents the expected return of a security based on its systematic risk or beta.
Return Rate
The gain or loss on an investment over a specified period, expressed as a percentage of the investment’s initial cost.
Intercept Point
The exact point on a graph where two lines meet, often used in statistical analysis and economics.
- Gain insight into the significance and concepts of the security market line (SML) and beta in portfolio management.
Verified Answer
KS
Karan SethiJul 30, 2024
Final Answer :
A
Explanation :
The intercept point of the Security Market Line (SML) represents the risk-free rate of return, which is the return expected from an investment with zero risk.
Learning Objectives
- Gain insight into the significance and concepts of the security market line (SML) and beta in portfolio management.