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The CAL formed from the optimal risky portfolio will be __________ to the efficient frontier of risky assets.

User Jahid
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Answer:

tangent

Step-by-step explanation:

The Capital Allocation Line refers to a line that measures the assets profile with respect to risk plus reward and can be applied to determine the optimal portfolio.

The optimal portfolio involves both risk-free assets and an efficient portfolio of assets i.e to be riskier.

The optimal portfolio of risky assets should be at that point at which the capital allocation line is tangent to the efficient frontier.

This portfolio is desirable since CAL 's slope is the maximum, implying we get the maximum return for the additional unit added with respect to risk.

User TecBeast
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