The Capital Market Line Can Be Used to Determine the Expected

question 53

Multiple Choice

The capital market line can be used to determine the expected return on any portfolio based on:

• A)unsystematic risk.
• B)the degree of risk on that portfolio.
• C)the market rate of return.
• D)None of the above

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Definitions:

Income Stream

A regular flow of money from an investment, property, or other financial assets.

Real Interest Rate

The interest rate adjusted for inflation, reflecting the real cost of borrowing or the real yield on savings.

Perfect Substitute

Two or more goods that can be used interchangeably with no loss of utility by the consumer.

Consumption

The process or activity of using goods and services, reflecting the end-use of products that directly satisfies human needs or desires.