Which of the following statements regarding the capital allocation line (CAL) is false?
A) The CAL shows risk-return combinations.
B) The slope of the CAL equals the increase in the expected return of the complete portfolio per unit of additional standard deviation.
C) The slope of the CAL is also called the reward-to-volatility ratio.
D) The CAL is also called the efficient frontier of risky assets in the absence of a risk-free asset.

Question

Quizplus · Accepted Answer

The Capital Allocation Line (CAL) represents combinations of risk-free assets and a portfolio of risky assets, not the efficient frontier of risky assets alone. The efficient frontier refers to the set of portfolios that offer the highest expected return for a given level of risk or the lowest risk for a given level of expected return, without considering a risk-free asset.

Which of the Following Statements Regarding the Capital Allocation Line