Which Statement Is True Regarding the Capital Market Line (CML)?I)

question 19

Multiple Choice

Which statement is true regarding the capital market line (CML) ?I) The CML is the line from the risk-free rate through the market portfolio.II) The CML is the best attainable capital allocation line.III) The CML is also called the security market line.IV) The CML always has a positive slope.

• A) I only
• B) II only
• C) III only
• D) IV only
• E) I, II, and IV

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Definitions:

Master Budget

A comprehensive financial planning document that consolidates all of a company’s individual budgets, including sales, production, and expenses, for a specific period.

Flexible Budgets

Budgets that adjust or flex with changes in volume or activity, allowing for more accurate comparisons to actual results.

Planning and Control

Processes used by management to establish objectives, execute plans to meet those objectives, and monitor progress.

Responsibility Accounting

An accounting system that collects, summarizes, and reports financial information about different areas of responsibility within an organization.