The Capital Allocation Line Provided by a Risk-Free Security and N

question 7

Multiple Choice

The Capital Allocation Line provided by a risk-free security and N risky securities is

• A)the line that connects the risk-free rate and the global minimum-variance portfolio of the risky securities.
• B)the line that connects the risk-free rate and the portfolio of the risky securities that has the highest expected return on the efficient frontier.
• C)the line tangent to the efficient frontier of risky securities drawn from the risk-free rate.
• D)the horizontal line drawn from the risk-free rate.
• E)none of the above.

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