Check each statement that is correct regarding the Capital Market Line and the Security Market Line.

Check All That Apply

The SML describes a linear relationship between risk and expected return.The SML describes a linear relationship between risk and expected return.

The CML describes a linear relationship between risk and expected return.The CML describes a linear relationship between risk and expected return.

The SML describes an exponential relationship between risk and expected return.The SML describes an exponential relationship between risk and expected return.

The CML describes an exponential relationship between risk and expected return.The CML describes an exponential relationship between risk and expected return.

The SML uses standard deviation as a measure of total risk.The SML uses standard deviation as a measure of total risk.

The CML uses standard deviation as a measure of total risk.The CML uses standard deviation as a measure of total risk.

The SML uses beta as a measure of systematic risk.The SML uses beta as a measure of systematic risk.

The CML uses beta as a measure of systematic risk.The CML uses beta as a measure of systematic risk.

The SML should only be used to evaluate well-diversified portfolios. The SML should only be used to evaluate well-diversified portfolios.

The CML should only be used to evaluate well-diversified portfolios. The CML should only be used to evaluate well-diversified portfolios.

The SML can be used to evaluate both individual securities and well-diversified portfolios.The SML can be used to evaluate both individual securities and well-diversified portfolios.

The CML can be used to evaluate both individual securities and well-diversified portfolios.