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Draw the capital market line (i.e., the most efficient capital allocation line that is defined on the T-bill fund (or the risk-free asset) and the
Draw the capital market line (i.e., the most efficient capital allocation line that is defined on the T-bill fund (or the risk-free asset) and the tangency portfolio. Note that expected return and standard deviation of the tangency portfolio are from your answers to problem 4. What is the Sharpe ratio of the capital market line, or the best feasible capital allocation line? How do you interpret the Sharpe ratio?
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