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
E) none of these

Question

Quizplus · Accepted Answer

The line that connects the risk-free rate and the optimal risky portfolio is called the Capital Allocation Line (CAL). It represents all possible combinations of risky portfolio assets and the risk-free asset. The CAL is also known as the reward-to-variability ratio or the Sharpe Ratio.

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