It is a line used in the CAPITAL ASSET PRICING MODEL or simply the CAPM model proposed by William Sharpe to illustrate the rates of return for the EFFICIENT PORTFOLIO depending on its risk-free rate of return and the level of risk (Standard deviation) for a particular portfolio.
In simple words, Capital market Line or the CML represents the equilibrium relationship between the expected return and the standard deviation for the efficient portfolios.
Thursday, December 31, 2009
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