What are Capital Market Line and Market Portfolio
What are Capital Market Line and Market Portfolio?
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According to the theory, no one must hold portfolios that are not on the efficient frontier. Moreover, if you introduce a risk-free investment in the universe of assets, the efficient frontier turns into the tangential line demonstrated in figure. This line is termed as the Capital Market Line and the portfolio at the point at that it is tangential is termed as the Market Portfolio.
Now, again as per to the theory, no one ought to hold any portfolio of assets but the Market Portfolio and the risk-free investment.
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