Question

Compared to every other point in the investment universe, any point on the Capital Market Line...

Compared to every other point in the investment universe, any point on the Capital Market Line has

the highest return   

the highest Sharpe Ratio

the least number of portfolio constituent assets

None of the above
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Answer #1

The capital market line , is the line that represents the best possible return for a given amount of risk .

So capital market line represents portfolios that combine the best risk return trade offs.

Since it is not the highest return, since that statement is incomplete. It is highest return for a given level of risk.

Sharpe ratio is the return of an investment compared to its risk. So since Capital Market line represents the highest return for a given amount of risk, the sharpe ratio is the highest at the Capital Market line.

Hence B is the right answer.

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