When markets are in equilibrium,the CML is upward sloping:
A)because it shows the optimum combination of risky securities.
B)because the price of risk must always be positive.
C)because it contains all securities weighted by their market values.
D)because investors expect returns to increase over time.

Question

Quizplus · Accepted Answer

The Capital Market Line (CML) is upward sloping because it represents the risk-return trade-off in the market, where the price of risk (market risk premium) is positive, indicating that higher risk is associated with higher expected returns.

When Markets Are in Equilibrium,the CML Is Upward Sloping