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It is discussed in efficient market hypothesis, meaning that you can not beat the market. Capital market line is drawn as a tangent on the curve representing both risky and non risky portfolio. At the point where tangent is drawn represents a model portfolio akin to market. All portfolio above this point has a higher risk reward ratio.
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What is advantage of security market line?
SML is also known as Security market line. It is the graphical representation of CAPM or Capital Asset Pricing Model. Here few advantages of SML approach: Financing of Capital Goods Additional Source of Finance
How do market rates and the company's perceived market risk impact its cost of capital?
How does the capital market affect corporate governance?
How does capital market line differ from security market line?
From Investopedia.com: The capital market line (CML) is a line used in the capital asset pricing model to illustrate the rates of return for efficient portfolios depending on the risk-free rate of return and the level of risk (standard deviation) for a particular portfolio. The CML is derived by drawing a tangent line from the intercept point on the efficient frontier to the point where the expected return equals the risk-free rate of return. The CML is considered to be superior to the efficient frontier since it takes into account the inclusion of a risk-free asset in the portfolio. The capital asset pricing model (CAPM) demonstrates that the market portfolio is essentially the efficient frontier. This is achieved visually through the security market line (SML). The security market line is a line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky marketable securities. The SML essentially graphs the results from the capital asset pricing model (CAPM) formula. The x-axis represents the risk (beta), and the y-axis represents the expected return. The market risk premium is determined from the slope of the SML. The security market line is a useful tool in determining whether an asset being considered for a portfolio offers a reasonable expected return for risk. Individual securities are plotted on the SML graph. If the security's risk versus expected return is plotted above the SML, it is undervalued because the investor can expect a greater return for the inherent risk. A security plotted below the SML is overvalued because the investor would be accepting less return for the amount of risk assumed.
Is dealer commercial paper money market or capital market?
Money Market
What are the characteristics of capital market authority?
The capital market authority is a Saudi Arabian government organization. It's responsibilities are setting rules and regulations. The capital market authority reports directly to the prime minister
What is the problem definition of capital market?
Definition of capital market line
Who discovered the capital market line?
James Tobin (1958) extended Markowitz's work by developing the Capital Market Line.
What Portfolio is located on the capital market line to the left of the market portfolio?
a portfolio with a long position in risk free assest
What is advantage of security market line?
SML is also known as Security market line. It is the graphical representation of CAPM or Capital Asset Pricing Model. Here few advantages of SML approach: Financing of Capital Goods Additional Source of Finance
What do you mean by capital market?
capital market is a market where long term loans are availble that place called capital market
Is a preferred stock a money market or a capital market?
capital market
Who are the capital market and money market operators?
who are the operators of money market and capital market
Is the stock market a part of the capital market?
The stock market is part of the Capital Market. The Capital Market also includes the bond market. The U.S. Securities and Exchange Commission (SEC)protects investors in the capital market from fraud.
What is the functions of a capital market?
functions of capital market
What are financial markets?
A market for the exchange of capital and credit, including the money market and the capital market.
Development of the capital market in India?
features of capital market development india
What are the principal money market and capital market instrument available to the bank in Bangladesh?
What are the Capital Market Securities of Bangladesh
