In the mean standard deviation graph, the line that connects the risk-free rate and the optimal risky portfolio, P, is called the ________.
A) capital allocation line
B) indifference curve
C) investor's utility line
D) security market line

Question

Quizplus · Accepted Answer

The line that connects the risk-free rate and the optimal risky portfolio, P, is called the capital allocation line. This line represents all possible combinations of the risk-free asset and the risky portfolio, and is used to determine the optimal mix of the two assets based on an investor's risk preference.

In the Mean Standard Deviation Graph, the Line That Connects