1 / 5

CAPM

CAPM. The Capital Market Line CML. Drawing the Capital Market Line. Step 1. Plot each portfolio onto the Risk/Return Chart. Return. Rp. Risk. Drawing the Capital Market Line. Step 2. Freehand draw the efficiency frontier by joining the outermost points to form a smooth curve. Return. Rp.

fia
Download Presentation

CAPM

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CAPM The Capital Market Line CML

  2. Drawing the Capital Market Line Step 1. Plot each portfolio onto the Risk/Return Chart Return Rp Risk

  3. Drawing the Capital Market Line Step 2. Freehand draw the efficiency frontier by joining the outermost points to form a smooth curve Return Rp Risk

  4. Drawing the Capital Market Line Step 3. Plot the risk free interest rate CML Por t fol io Return And then draw the capital market line from the risk free point at a tangent (just nicking) to the efficiency frontier Rp Risk

  5. BINGO ITS DONE! Por t fol io Return CML Super-efficient portfolio Efficient Portfolios Optimal Portfolio Efficiency Frontier All portfolios below efficiency frontier are inefficient portfolios Rp Risk

More Related