The market line must
A) pass through the risk-free asset.
B) be linear.
C) be tangent to the efficient set.
D) all of the above.

Question

Quizplus · Accepted Answer

The market line is a linear relationship that represents the expected return and risk for a portfolio. It connects the risk-free asset with the tangency point of the efficient frontier, which represents the optimal portfolio that investors should choose to maximize their return for a given level of risk. Therefore, the market line must pass through the risk-free asset and be tangent to the efficient set, and be linear. Hence, all of the above options are correct.

The Market Line Must