All possible portfolios lie on the CML.

Name: All possible portfolios lie on the CML.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

The Capital Market Line (CML) represents portfolios that optimally combine risk and return, but not all possible portfolios lie on it; only those that are perfectly diversified, combining the market portfolio with a risk-free asset, do. Other portfolios can exist but they do not offer the same level of efficiency in terms of risk-return trade-off.

All Possible Portfolios Lie on the CML