The equation of the Capital Allocation Line will equal the Intercept plus the Slope.
Expected Return = Risk free rate + ((Expected Return – Risk Free)/standard deviation of the investment) * the standard deviation of the portfolio. The intercept is the risk-free rate and the slope is the additional required rate of return per increases in risk. These increases in risk or known as market prices of risk.
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7/1/2020 10:34:17 am
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