In the mean-standard deviation graph, the line that connects the risk-free rate and the optimal risky portfolio, P, is called
A) the security market line.
B) the capital allocation line.
C) the indifference curve.
D) the investor's utility line.

Question

Quizplus · Accepted Answer

The capital allocation line (CAL) represents the risk-return trade-off in a portfolio containing a risk-free asset and an optimal risky portfolio, P. It shows the highest expected return for a given level of risk.

In the Mean-Standard Deviation Graph, the Line That Connects the Risk-Free