Suppose that CAPM holds. Let Rf denote the risk free rate, E(RM) the expected return of the market portfolio, and sigmaM the standard deviation of the market portfolio.

Now consider some portfolio on the capital market line, with expected return E(R) and standard deviation sigma_. What is the beta of this portfolio?

Select one:

1. E(R)/sigma

2. sigmaM/sigma

3. sigma/sigmaM

4. E(RM)-Rf