The Capital Allocation Line can be described as the
A) investment opportunity set formed with a risky asset and a risk-free asset.
B) investment opportunity set formed with two risky assets.
C) line on which lie all portfolios that offer the same utility to a particular investor.
D) line on which lie all portfolios with the same expected rate of return and different standard deviations.
E) none of these.

Question

Quizplus · Accepted Answer

The Capital Allocation Line is formed by combining a risk-free asset and a risky asset. It represents all the possible portfolios formed by combining the risk-free asset and the risky asset in different proportions, depending on the investor's risk preference. Therefore, choice A is the correct answer.

The Capital Allocation Line Can Be Described as the