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**Basic Question 1 of 11**

The SML relates ______.

B. expected return of securities to expected return of portfolios

C. efficient sets of portfolios to the risk-free rate

D. expected return to beta

E. standard deviation to risk

A. expected return to standard deviation

B. expected return of securities to expected return of portfolios

C. efficient sets of portfolios to the risk-free rate

D. expected return to beta

E. standard deviation to risk

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**User Contributed Comments**
3

User |
Comment |
---|---|

mattg |
SML relates risk (measured by beta) to expected return |

jpducros |
systematic risk I would say...not total risk |

khalifa92 |
@ jpducros you're mistaken. the security market line applies to any security, efficient or not. total risk and systematic are equal to ONLY for efficient PORTFOLIOS because those portfolios have no diversifiable risk remaining. don't mix the two things. |

I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.

#### Edward Liu

**Learning Outcome Statements**

explain the capital asset pricing model (CAPM), including its assumptions, and the security market line (SML);

calculate and interpret the expected return of an asset using the CAPM;

*CFA® 2024 Level I Curriculum, Volume 5, Module 63.*