To combine the risk-free asset with the efficient frontier, we have the
A) capital asset line.
B) Beta coefficient
C) reward-to risk ratio.
D) security market line.
E) market risk premium.

Question

Quizplus · Accepted Answer

The capital asset line is the line that represents the combination of the risk-free asset with the efficient frontier. It shows the tradeoff between risk and return that investors can achieve by combining a risk-free asset with a portfolio of risky assets on the efficient frontier. Therefore, the correct choice is A. The other options are related to different concepts in finance, but they are not directly related to the combination of the risk-free asset with the efficient frontier.

To Combine the Risk-Free Asset with the Efficient Frontier, We