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If the market portfolio has an expected return of 15 percent
and a standard deviation
of 20 percent, and the risk-free rate of interest is 8
percent,
I) What is the slope of the capital market line
(CML)? (5marks)
ii) What does this mean to an investor? (5marks)

Question Posted / james


If the market portfolio has an expected return of 15 percent and a standard deviation of..

Answer / Rajeev Raghuwanshi

This means that an investor can construct their own efficient portfolio by choosing the right mix of risk-free and risky assets. The slope of the CML shows the expected return for each unit of risk taken, which helps investors determine optimal asset allocations based on their risk tolerance.

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