Which of the following statements is CORRECT? A)The slope of the CML is ( $\hat { r }$ _M ? r_RF)/b_M. B)All portfolios that lie on the CML to the right of ?_M are inefficient. C)All portfolios that lie on the CML to the left of ?_M are inefficient. D)The slope of the CML is ( $\hat { r }$ _M ? r_RF)/?_M. E)The Capital Market Line (CML) is a curved line that connects the risk-free rate and the market portfolio.

Question

Quizplus · Accepted Answer

The slope of the CML is given by ( $\hat { r }$ - rF) / σM, where $\hat { r }$ is the expected return on the market portfolio, rF is the risk-free rate, and σM is the standard deviation of the market portfolio. Therefore, choice D is correct, while choices A, B, and C are incorrect. Choice E is partially correct in describing the endpoints of the CML, but it does not provide information about the slope of the line.

Which of the Following Statements Is CORRECT? A)The Slope of the CML

Which of the Following Statements Is CORRECT?
A)The Slope of the CML