The correct answer is: A. non-aggregate
The capital market line (CML) is a line that represents the efficient frontier of risky assets, given a risk-free asset. The CML shows the combinations of risk and return that are available to investors, given their risk aversion. The CML is considered to be an effective way to measure risk and return, and it is used by many investors to make investment decisions.
The CML is a non-aggregate measure of risk and return. This means that it does not take into account the individual risk and return characteristics of each asset. Instead, the CML is a measure of the overall risk and return of the market portfolio. This is important because it allows investors to compare the risk and return of different assets without having to worry about the individual risk and return characteristics of each asset.
The CML is a useful tool for investors, but it is important to remember that it is just a tool. The CML does not guarantee that investors will make money, and it does not take into account all of the factors that can affect an investment’s performance. Investors should always do their own research before making any investment decisions.
Here is a brief explanation of each option:
- A. non-aggregate: The CML is a non-aggregate measure of risk and return. This means that it does not take into account the individual risk and return characteristics of each asset. Instead, the CML is a measure of the overall risk and return of the market portfolio.
- B. effective: The CML is considered to be an effective way to measure risk and return. It is used by many investors to make investment decisions.
- C. ineffective: The CML is not a perfect measure of risk and return. It does not take into account all of the factors that can affect an investment’s performance.
- D. aggregate: The CML is not an aggregate measure of risk and return. It is a measure of the overall risk and return of the market portfolio.