The Capital Market Line (CML) as Defined by the Capital

question 24

Multiple Choice

The capital market line (CML) as defined by the capital asset pricing model is characterized by all of the following except:

• A)a straight line tangent to the efficient frontier.
• B)a straight line which includes the rate of return on a risk-free asset.
• C)a point on the efficient frontier above which higher returns can be generated by borrowing funds without assuming more risk.
• D)All of the above are characteristics of the capital market line

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Definitions:

Interest Rate

A percentage that represents the cost of borrowing money or the profit earned from an investment.

Equivalent Interest

An interest rate or yield that is calculated to be comparable across different compounding periods or payment schedules.

Nearest 0.01%

This refers to rounding calculations to the closest hundredth of a percent, commonly used for precision in interest rates and financial metrics.

Nearest 0.01%

Rounding or approximating a numerical value to the closest hundredth of a percent.