You are required to comment: (c) What is the functional relationship between the required return for a security and market risk?

The functional relationship between the required return for a security and market risk (systematic risk) is direct and positive. In the CAPM, market risk is measured by Beta (β). A higher Beta indicates higher market risk, meaning the security's returns are more sensitive to overall market movements. Investors demand a higher return for taking on higher market risk. Therefore, the required return for a security is directly proportional to its market risk (Beta).