The Capital Market Line
I.is a special case of the Capital Allocation Line.
II.represents the opportunity set of a passive investment strategy.
III.has the one-month T-Bill rate as its intercept.
IV.uses a broad index of common stocks as its risky portfolio.
A)I, III, and IV
B)II, III, and IV
C)III and IV
D)I, II, and III
E)I,II,III,and IV

Question

Quizplus · Accepted Answer

The Capital Market Line (CML) is a special case of the Capital Allocation Line (I), represents the opportunity set of a passive investment strategy (II), has the risk-free rate (often approximated by the one-month T-Bill rate) as its intercept (III), and uses a broad index of common stocks as its risky portfolio (IV).