What is CAPITAL MARKET LINE?

A relationship within the CAPITAL ASSET PRICING MODEL (CAPM) that relates the expected return of a PORTFOLIO to its expected RISK (as measured through STANDARD DEVIATION). Under CAPM, all investors will choose a position on the capital market line by borrowing or lending at the RISKFREE RATE, since this maximizes return for a given level of risk. See also SECURITY MARKET LINE.

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