medium · CFA Level I pm
At Solstice Utilities, the risk manager is defining the 'Capital Market Line' (CML) and the 'Security Market Line' (SML) for a group of new hires.
Which of the following statements correctly distinguishes the two?
- The SML prices only efficient portfolios, while the CML prices all assets.
- The slope of the CML is the Sharpe ratio, while the slope of the SML is the market risk premium.
- The CML uses total risk as the independent variable, while the SML uses systematic risk.
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