CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Researchers were able to develop the CAPM by adding what variable to the efficient frontier?

A. Return on the market
B. Measure of risk
C. Risk-free rate
D. Beta
Correct Answer: C

User Contributed Comments 6

User Comment
tonypractice i thought the answer should be beta? ... since the efficient frontier [CML] already included the variable of Rf return ??
julescruis What they mean is the transition from the Markowitz efficient frontier into the capital market line. The Markowitz efficient frontier did not input the effect of the risk free rate. Adding risk free rate gives you what is being referred to as capital market theory or in the case of this question Capital Asset Pricing Model.
hannovanwyk the efficient frontier only had risky assets remember...
loisliu88 efficient frontier + risk free rate= CAPM? can anyone explain?
michlam14 a bit confused. CAL/CML belongs to which theory? I thought it is the Capital Market theory, but i get confused with modern portfolio theory and CAPM
UcheSam Risk free rate is added to efficient frontier to develop CML while Beta is added to CAPM to develop SML based on AnalystNotes.
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