The beta coefficient of an asset can be expressed as a function of the asset's correlation with the market as follows;bi=rho iM si / sM;rho iM = correlation between the security's returns and market returns;si= standard deviation of security's returns;sm= standard deviation of market's returns;1. Substitute this expression for beta into the Security Market Line (SML) This will result in the alternative form of SML.;2. Compare your answer to part with the Capital Market Line (CML) What are the similarities and what conclusion can be drawn?
Capital Market Line (CML) and Security Market Line (SML)
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