The Security Market Line (SML) plots:

A Total risk vs. return

B Expected return vs. beta (systematic risk)

C Standard deviation vs. return

D Alpha vs. tracking error

✓ Correct Answer: Option B

The SML graphs expected return on the y-axis against beta on the x-axis. Securities above are undervalued.

💡 Why is B) the correct answer?

The correct answer to the question "The Security Market Line (SML) plots:" is Option B: Expected return vs. beta (systematic risk).

The other options — A) Total risk vs. return, C) Standard deviation vs. return, D) Alpha vs. tracking error — are incorrect for this CFA Exam Prep question. As explained above: The SML graphs expected return on the y-axis against beta on the x-axis. Securities above are undervalued.

📚 About This CFA Exam Prep Practice Question

This 2-level CFA Exam Prep question from the Portfolio Management topic is part of BrainForge Quiz's free exam preparation library. Each question includes the correct answer and a detailed explanation to help you understand the underlying concept, not just memorize the answer.

How to use this page: Read the question above, consider all four options (A through D), then check the highlighted correct answer and explanation. For active timed practice, start a free CFA Exam Prep practice test or use flashcards for spaced repetition review.

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The Security Market Line (SML) plots:

✓ Correct Answer: Option B

📚 About This CFA Exam Prep Practice Question

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