Which of the Following Represents the Capital Market Line (CML) $\sigma$

question 18

Multiple Choice

Which of the following represents the capital market line (CML) ? (R_T and $\sigma$ _T are the mean and standard deviation of the tangency portfolio's return,respectively. $\sigma$ _P is the standard deviation of the portfolio,and r_f is the return of the risk-free asset.)

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Definitions:

Systematic Risk

The risk inherent to the entire market or market segment, also known as "market risk," which cannot be reduced through diversification.

Unsystematic Risk

The risk of price change in a company's stock due to company-specific events, distinguishable from market-wide risk.

Business-specific Risks

Refers to the uncertainties or potential financial losses that are directly related to the operations and environment of a particular company or industry.

Diversified Away

The reduction of risk in an investment portfolio by allocating investments among various financial instruments, industries, and other categories to minimize the impact of any single asset or risk.