- CFA Exams
- CFA Level I Exam
- Study Session 18. Portfolio Management (1)
- Reading 53. Portfolio Risk and Return: Part II
- Subject 3. The Capital Asset Pricing Model

###
**CFA Practice Question**

Compared to the traditional Capital Asset Pricing Model (CAPM), where lending and borrowing are carried out at the risk-free rate, a zero-beta CAPM would most likely result in a security market line (SML) with ______.

A. unchanged slope

B. a steeper slope

C. a flatter slope

**Explanation:**Compared to the traditional CAPM, where lending and borrowing takes place at the risk-free rate, a zero-beta CAPM will result in a SML that has a flatter slope.

###
**User Contributed Comments**
5

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

something |
What is zero beta? - I think AN should send an email for any comment on the subscribed ( commented) question. |

ascruggs92 |
Zero beta means market neutral. beta the measure of correlation between the market and an individual asset, so having a beta of zero means that an asset's value is completely unrelated to movements in the market |

lighty0770 |
Why is this flatter slope? If its a 0 beta then the slope is 0 and the SML stays at the Rf? |

xe077 |
Can someone explain? Zero beta is same as risk free. correct? |

joester25 |
Beta of zero has less return for a given level of risk. Therefore, the slope is flatter. |