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What is the 'Capital Market Line  CML'
The capital market line (CML) is a line used in the capital asset pricing model to illustrate the rates of return for efficient portfolios depending on the riskfree rate of return and the level of risk (standard deviation) for a particular portfolio.
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BREAKING DOWN 'Capital Market Line  CML'
The CML is derived by drawing a tangent line from the intercept point on the efficient frontier to the point where the expected return equals the riskfree rate of return.
The CML is considered to be superior to the efficient frontier since it takes into account the inclusion of a riskfree asset in the portfolio. The capital asset pricing model (CAPM) demonstrates that the market portfolio is essentially the efficient frontier. This is achieved visually through the security market line (SML).
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Efficient Frontier
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The difference between the expected return on a market portfolio ...
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RELATED FAQS

How have portfolios from within the efficient frontier performed historically?
Explore how the efficient frontier is used in selecting investment portfolios. Find out how risks and returns are used to ... Read Answer >> 
What are the advantages of portfolio planning with the efficient frontier?
Learn about modern portfolio theory and the efficient frontier. Understand the advantages of portfolio planning with the ... Read Answer >> 
How do I interpret a Security Market Line (SML) graph?
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How is it possible for a rate to be entirely riskfree?
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What is the correlation between equity risk premium and risk?
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