The capital allocation line can be described as the
A. investment opportunity set formed with a risky asset and a risk-free asset.
B. investment opportunity set formed with two risky assets.
C. line on which lie all portfolios that offer the same utility to a particular investor.
D. line on which lie all portfolios with the same expected rate of return and different standard deviations.
A. investment opportunity set formed with a risky asset and a risk-free asset.
The CAL has an intercept equal to the risk-free rate. It is a straight line through the point representing the riskfree asset and the risky portfolio, in expected-return/standard deviation space.
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