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Investments glossary

Capital Market Line (CML)


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Quotes of the day:

Everyone can get the gold of the Sun. (Tout le monde cueille l\'or du soleil)

— Charles de LEUSSE

The capital market line (CML) represents portfolios that optimally combine risk and return. Capital asset pricing model (CAPM), depicts the trade-off between risk and return for efficient portfolios. It is a theoretical concept that represents all the portfolios that optimally combine the risk-free rate of return and the market portfolio of risky assets. Under CAPM, all investors will choose a position on the capital market line, in equilibrium, by borrowing or lending at the risk-free rate, since this maximizes return for a given level of risk.


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