The line connecting the riskfree return with the tangent point of the efficient set of risky portfolios indicates combinations with

Question

Quizplus · Accepted Answer

The line connecting the riskfree return with the tangent point of the efficient set of risky portfolios is known as the Capital Market Line (CML). This line represents the combination of risky assets and risk-free asset that offer the highest expected return for a given level of risk (volatility). Therefore, the correct choice is D, which states that the line represents the highest expected return for a given level of risk.

The Line Connecting the Riskfree Return with the Tangent Point