Security Market Line: Difference between revisions
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Re = return on security. | Re = return on security. | ||
Rf = theoretical [[risk free rate of return]]. | Rf = theoretical [[risk-free rate of return]]. | ||
Beta = relative market risk. | Beta = relative market risk. | ||
Latest revision as of 20:57, 5 February 2018
(SML).
The Security Market Line is a graphical presentation of the Capital asset pricing model formula:
Re = Rf + beta x [Rm-Rf]
Where:
Re = return on security.
Rf = theoretical risk-free rate of return.
Beta = relative market risk.
Rm = average expected rate of return on the market.
