Question

The Capital Market Line is derived by drawing a tangent line from the intercept point on the efficient frontier to the point where the expected return equals the market rate of return.

Select one:

True

False

Answer 1

Solution-

The Capital Market Line is derived by drawing a tangent line from the intercept point on the efficient frontier to the point where the expected return equals the market rate of return.

This statement is False.

Reason-

This statement is False because, The capital market line is created by sketching a tangent line from the intercept point on the efficient frontier to the place where the expected return on a holding equals the risk-free rate of return.