What Is Capital Market Line

What Is Capital Market Line. CML stands for Capital Market Line and SML stands for Security Market Line The CML is a line that is used to show the rates of return which depends on riskfree rates of return and levels of risk for a specific portfolio.

CML (Capital Market Line) CML on the other hand is a graphical representation that tells the rate at which the securities are providing a return In simple words it helps to determine the degree of profit an investor makes as per their investment.

Capital Market Line (CML) Definition

Capital market is a market where buyers and sellers engage in trade of financial securities like bonds stocks etc The buying/selling is undertaken by participants such as individuals and institutions Description Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use Generally.

Difference between Capital Market Line and Security Market

In the capital market the money from individual investors or households is invested in a firm’s shares or bonds In return investors gain profits as well as goods and services The market comprises suppliers and buyers of finance along with trading instruments and mechanisms There are also regulatory bodies.

Capital market line financial definition of capital market

OverviewFormulaCapital market line Sharpe ratio and alphaSee alsoCapital market line (CML) is the tangent line drawn from the point of the riskfree asset to the feasible region for risky assets The tangency point M represents the market portfolio so named since all rational investors (minimum variance criterion) should hold their risky assets in the same proportions as their weights in the market portfolio Text under.