SML and CML Comparison The beta coefficient of an asset can be expressed as a function of the asset's correlation with the market as follows: j Pin ON Av a. Substitute this expression for beta into the Security Market Line (SML). equation below. SML: n = RF+ (MRP) - RF+ (RPM) This results in an alternative form of the SML. 1. n - nr + ( + PRP) II. RF+ (OM-TRP) M III. + (MRP) w IV. TRF + (-) ar The correct equation is: -Select- b. Compare your answer to part a with the Capital Market Line (CML), equation below. CML: F, = Tre + ON What similarities do you observe? What conclusions can you drawn? Wher in this form, the CML and SML have the same market price of risky The measure of risk in the Select is op. The measure of risk in the selects Dimo, and is 1-Select-than for all assets except those which are perfectly positively correlated with the market