Capital Market Line (CML)
The Capital Market Line (CML) is the line on the mean‑variance plane representing the set of portfolios that combine the risk‑free asset with the market portfolio; its slope equals the market portfolio's Sharpe ratio, and it is tangent to the efficient frontier of risky assets.
Example: An investor assesses a mix of a Treasury bill (risk‑free asset) and a broad market index fund (market portfolio) to determine a position along the CML for a given level of expected return and risk.
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