SML and CML
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Discuss the differences and similarities between the security market line (SML) and capital market line (CML).
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The solution provides the differences between SML and CML.
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CML plots expected return as function of portfolio volatility; SML plots expected return as function of beta. Both are risk/return but CML is total risk and SML is systematic risk
Both are anchored on y-axis at the riskless portfolio; i.e., a riskless asset/portfolio offers neither volatility nor systematic risk. Both contain the market portfolio. On the SML, the market ...
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