The SML represents a stable stock market equilibrium in which:

A) investors are happy because their expected and required rates of return are at least equal.
B) there is not an excess of buyers or sellers and the market remains where it is.
C) a slight disequilibrium with respect to a particular stock produces market forces that tend to equalize the stock's expected and required returns through changes in its price.
D) All of the above

Security Market Line

A representation in financial markets that shows the relationship between risk (as measured by beta) and the expected return of a portfolio or individual security.

Stock Market Equilibrium

A situation where the supply of stocks for sale is equal to the demand, and hence the market price is stable.

Required Rates of Return

The minimum annual percentage earned by an investment that will persuade the individual or company to invest.