The security market line can be defined as:

A) R_m + (R_m- R_f) .
B) R_m + (R_f- R_m) .
C) R_f + (R_f- R_m) .
D) R_f + (R_m + R_f) .
E) R_f + (R_m- R_f) .

Question

The security market line can be defined as:A)  R m  + (R m - R f ) .B)  R m  + (R f - R m ) .C)  R f  + (R f - R m ) .D)  R f  + (R m  + R f ) .E)  R f  + (R m - R f ) .

Jayme Lalaine · Accepted Answer

Final Answer : E, Explanation :  The security market line (SML) is represented by the equation: Expected Return = Risk-Free Rate + Beta * (Market Return - Risk-Free Rate). This equation reflects the relationship between risk and expected return for all assets in a competitive market. Choice E correctly translates this relationship into the formula format provided in the question, where R f  represents the risk-free rate and R m  represents the market return.

The security market line can be defined as:

A) R_m + (R_m- R_f) .
B) R_m + (R_f- R_m) .
C) R_f + (R_f- R_m) .
D) R_f + (R_m + R_f) .
E) R_f + (R_m- R_f) .

Definitions

Learning Objectives

Learning Objectives

Related questions

The security market line can be defined as:A) Rm + (Rm- Rf) .B) Rm + (Rf- Rm) .C) Rf + (Rf- Rm) .D) Rf + (Rm + Rf) .E) Rf + (Rm- Rf) .

Definitions

Learning Objectives

Learning Objectives

Related questions

The security market line can be defined as:

A) R_m + (R_m- R_f) .
B) R_m + (R_f- R_m) .
C) R_f + (R_f- R_m) .
D) R_f + (R_m + R_f) .
E) R_f + (R_m- R_f) .