Quick Finance Tip – Capital Market Line and Leveraged Portfolios

​With different lending and borrowing rates, the Capital Market Line ceases to a be a straight line. In the Capital Market Line, the weighting of the risk-asset equals one, but when the weighting falls below that level, the rate is substituted for a higher “borrowing rate”. This represents a break in the Capital Market Line. Last note, leverage allows less risk-averse investors to increase the amount of risk they take by borrowing money and investing more.