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.
E)Both A and D are false.

Question

Quizplus · Accepted Answer

The CAL is not the efficient frontier of risky assets; it represents combinations of a risk-free asset and a portfolio of risky assets. The efficient frontier refers to portfolios that offer the highest expected return for a given level of risk without including a risk-free asset.

Which of the Following Statements Regarding the Capital Allocation Line