Which of the following statements is CORRECT?
A) The Capital Market Line (CML) is a curved line that connects the risk-free rate and the market portfolio.
B) The slope of the CML is (M - rRF)/bM.
C) All portfolios that lie on the CML to the right of M are inefficient.
D) All portfolios that lie on the CML to the left of M are inefficient.
E) The slope of the CML is (M - rRF)/M..

Question

Quizplus · Accepted Answer

The slope of the Capital Market Line (CML) is calculated as (M - rRF)/σM, where M is the expected return of the market portfolio, rRF is the risk-free rate, and σM is the standard deviation of the market portfolio.

Which of the Following Statements Is CORRECT