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d. Explain the idea behind the capital market line. Write out the equation for the capital market line (CML) and draw it on the graph.
d. Explain the idea behind the capital market line. Write out the equation for the capital market line (CML) and draw it on the graph. Interpret the CML. Explain how an investor's optimal portfolio is some combination of the risky portfolio and the risk-free asset. What is the composition of the risky portfolio? Why do the different investors choose different portfolios? How does risk preference effect where they will choose to be.
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