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Answer: Jensen's alpha, which represents the intercept of the SCL.
The security characteristic line (SCL) plots the excess return of a security against the excess return of the market. The intercept of the SCL is known as **Jensen's alpha**, which measures the performance of the security relative to the market. The slope of the SCL is the **beta coefficient**, representing the security's systematic risk. The **risk-free rate of return** is the intercept on the y-axis of the security market line (SML), not the SCL. Therefore, option B is correct.
Author: LeetQuiz Editorial Team
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The intercept on the y-axis of the security characteristic line (SCL) is best represented by:
A
The beta coefficient, which measures the slope of the SCL.
B
Jensen's alpha, which represents the intercept of the SCL.
C
The risk-free rate of return, which is the intercept on the y-axis of the security market line (SML).
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