According to the CAPM, the set of portfolios obtainable by combining the market portfolio with risk free borrowing or lending is known as the
A) capital market line
B) security market line
C) beta coefficient
D) feasible set

Question

Quizplus · Accepted Answer

The Capital Market Line (CML) represents the set of portfolios that optimally combine the market portfolio with risk-free lending or borrowing. The CML is used in the CAPM to determine the required return for a given level of risk, and it is derived by connecting the risk-free rate of return to the market portfolio through a line tangent to the efficient frontier.

According to the CAPM, the Set of Portfolios Obtainable by Combining