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Explain whether you agree/disagree with the following statement by providing a numerical example. “The Capital Allocation...

Explain whether you agree/disagree with the following statement by providing a numerical example.
“The Capital Allocation Line (CAL) for a risky portfolio can lie either above, below or on the Capital Market Line (CML)”
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Portfolios that fall on the capital market line (CML), in theory, optimize the risk/return relationship, thereby maximizing performance. The capital allocation line (CAL) makes up the allotment of risk-free assets and risky portfolio for an investor. CML is a special case of the CAL where the risk portfolio is the market portfolio. Thus, the slope of the CML is the sharpe ratio of the market portfolio. As a generalization, buy assets if the sharpe ratio is above the CML and sell if the sharpe ratio is below the CML.

Therefore , The Capital Allocation Line (CAL) for a risky portfolio can lie either above, below or on the Capital Market Line (CML)

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