Forecast about an investment payoff

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It is appropriate to refer to the security market line (SML) as the pricing line, because __________

a. Given the forecast about an investment's payoff (accumulated value), its expected return is determined by its equilibrium price.

b. None of the other options are correct

c. The expected return of a security is proportional to the time-series volatility of its equilibrium price.

d. Only idiosyncratic risk is priced in equilibrium.

e. Every investor invests in an equilibrium portfolio that has a lower Sharpe ratio than the market portfolio.

Reference no: EM133110382

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