The line originating from the risk-free rate to tangentiallyintersect the Efficient Frontier of Portfolios is...

The line originating from the risk-free rate to tangentially intersect the Efficient Frontier of Portfolios is often called:

Select one:

a. The Capital Market Line

b. Alpha

c. Beta

d. The coefficient of determination

Solutions

Expert Solution

The correct answer is "A"

Capital Market Line is the line that decides the allocation in a portfolio. An investor may invest anywhere between the Rf and the intersection of Efficient Frontier. If an investor is situated more towards the left, then it means that the investor is risk-averse and invests most funds in Rf securities. If the investment point is more towards right, then it means that the portfolio is invested more towards market.

jeff jeffy answered 2 years ago

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