Question

The capital market line I) is a special case of the capital allocation line. II) represents the opportunity set of a passive investment strategy. III) has the one-month T-Bill rate as its intercept. IV) uses a broad index of common stocks as its risky portfolio

Answer 1

The correct answer is letter "E": I, II, III, and IV.

Step-by-step explanation:

Capital Market Line or CML is a capital asset price model definition that shows the level of incremental return over the risk-free rate for each increase in risk level. CML analysis is one of many ways in which investors allocate their investment portfolios to reach the maximum expected return for the minimum risk amount. Also, CML represents the Capital Allocation Line based on a T-Bill rate of one month based on a broad index of common stocks.