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    SML and CML

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    Discuss the differences and similarities between the security market line (SML) and capital market line (CML).

    © BrainMass Inc. brainmass.com June 3, 2020, 10:26 pm ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/differences-sml-cml-230955

    Solution Preview

    CML plots expected return as function of portfolio volatility; SML plots expected return as function of beta. Both are risk/return but CML is total risk and SML is systematic risk

    Both are anchored on y-axis at the riskless portfolio; i.e., a riskless asset/portfolio offers neither volatility nor systematic risk. Both contain the market portfolio. On the SML, the market ...

    Solution Summary

    The solution provides the differences between SML and CML.

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