What is the "capital market line"? Who discovered it? Who uses it? Would you use it?...

What is the "capital market line"? Who discovered it? Who uses it? Would you use it? How does the capital market line relate to the security market line? Please feel free to expand on your answers.

Expert Solution

The capital market line is a line which shows the relationship between risk and return on different investment options. It depicts the risk as well as return on every investment option and enables investors to create a Portfolio with the best possible returns and least risk. Any investment options which Falls above the line is considered high risk and the options which are below the line would be low risk. Options which lie below the line tell the investors that they can switch to a risky investment.

The capital market line was discovered by Harry Markowitz and James Tobin.

The capital market line can be used by anybody and not just brokers or financial Advisors. However due to the complications involved it is generally used by financial Advisors who manage portfolios of their clients.

The capital market line shows the relationship between risk and return for efficient portfolio while the security market line is derived from the CML and represents the market risk and Returns.

jeff jeffy answered 2 years ago

What new product would you develop, how and who would you market it to?

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