- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 53. Portfolio Risk and Return: Part II
- Subject 4. Applications of the CAPM

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**CFA Practice Question**

A security characteristic line is ______

B. a graph of the required return on a security and its systematic risk.

C. the regression line between the excess return on a security and the excess return on the market portfolio.

A. the security market line when expressed in terms of the required return and standard deviation of a security or a portfolio.

B. a graph of the required return on a security and its systematic risk.

C. the regression line between the excess return on a security and the excess return on the market portfolio.

Correct Answer: C

A security characteristic line is a regression between the excess return on a security and the excess return on the market. The slope of the line provides an estimate of the beta of a security.

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