COMM 298 Lecture 23: 23.pdf
Document Summary
Class 23 last class: the capm and wacc. We"re looking for the line with the steepest slope that still touches the efficient frontier of all risky assets. The tangency point is the risky portfolio with the highest sharpe ratio. The line connecting the riskfree asset with the tangency portfolio m is called the efficient frontier of all assets. It"s also called the capital market line (cml) The capital market line (cml) (cid:78) the line connecting the riskfree asset and the tangency portfolio is called the capital market line (cml). The frontier of all risky assets represents risky portfolios, so the tangency point is a portfolio. (cid:78) by adding a risk-free asset, the efficient frontier is made uniformly better for all investors! The tangency portfolio m is the portfolio of risky assets with the highest. It is up to investors to decide how much of their wealth they put into t-bills and how much they put into the risky tangency portfolio.
