Definition of SML. The line that reflects the relationship between systematic risk and return available for all risky assets in the capital market at a given time.
What security market line means?
The security market line (SML) is a line drawn on a chart that serves as a graphical representation of the capital asset pricing model (CAPM)—which shows different levels of systematic, or market risk, of various marketable securities, plotted against the expected return of the entire market at any given time.
What is a market line quizlet?
security market line (SML) graphical representation of the linear relationship between systematic risk and expected returns. CAPM. capital asset pricing model is a theory of risk and return for securities in a competitive capital market.
What does the security market line depict quizlet?
What does the security market line depict? *Graphical depiction of the capital asset pricing model. It shows the relationship between expected return and beta.
What is the slope of the security market line quizlet?
The slope of the SML, which is the difference between the expected return on a market portfolio and the risk-free rate. In other words, it is the reward investors expect to earn for holding a portfolio of beta of 1. The equation of the SML showing the relationship between expected return and beta.
What is the slope of security market line?
The slope of the security market line represents the market risk premium, i.e. the excess return over the market return. The market risk premium compensates for the additional systematic risk associated with the security.
Which of the following are examples of securities?
Stocks, bonds, preferred shares, and ETFs are among the most common examples of marketable securities. Money market instruments, futures, options, and hedge fund investments can also be marketable securities.
What is the intercept of the Security Market Line SML quizlet?
What is the intercept of the Security Market Line (SML)? The Risk-Free Rate. Two factors determine a stock’s total return?
What can we say about the dividends paid to common and preferred stockholders?
What can we say about the dividends paid to common and preferred stockholders? Dividends to preferred stockholders are fixed. Dividends to common stockholders are not fixed.
What is unsystematic risk quizlet?
Unsystematic Risk. The type of uncertainty that comes with the company or industry you invest in. Diversification.
What is the intercept of the Security Market Line SML )?
The intercept of the security market line (SML) is the risk-free rate and the slope is the market risk premium. The relationship between the risk and return described by the SML is the Capital Asset Pricing Model (CAPM).