Question
Make a sketch of (i) the Capital Market Line (CML) and (ii) the Security Market Line (SML), based on a rough estimate of the risk-free
Make a sketch of (i) the Capital Market Line (CML) and (ii) the Security Market Line (SML), based on a rough estimate of the risk-free rate and the market risk premium, assuming S&P 500 as market portfolio. The exact numerical values are not important, but should be reasonable. Clearly label your axes in both the CML and in the SML. Indicate in both graphs an estimate of the locations of the shares of Ford and Tesla, and of S&P 500. Again, coordinates need not be precise, estimates may be even very rough. Briefly explain the chosen locations, in particular whether they are at, below, or above the lines in the graphs. Please respect the one-page restriction, be to-the-point.
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