The capital market line is the tangent line between the risk-free rate of return and the efficient frontier.

Question

Quizplus · Accepted Answer

This statement is true. The capital market line (CML) illustrates the combination of the risk-free asset and the market portfolio, and it represents the highest expected return an investor can achieve for a given level of risk. The CML is tangent to the efficient frontier (EF), which is the set of portfolios that offer the highest expected return for a given level of risk.

The Capital Market Line Is the Tangent Line Between the Risk-Free