• How does capital market theory extend Markowitz portfolio theory with the addition of a risk-free asset?
• What are the other critical assumptions underlying capital market theory?
• What is the capital market line (CML), and how does it enhance our understanding of the relationship between risk and expected return?
• What is the market portfolio, and what role does it play in the investment process implied by the CML?
• Under what conditions does the CML recommend the use of leverage in forming an investor's preferred strategy?