Question

The intercept of the CML is the origin while the intercept of the SML is RF CML consists of efficient portfolios, while the SML is concerned with all portfolios or securities CML could be downward sloping while that is impossible for the SML CML and the SML are essentially the same except in terms of the securities represented

Answer 1

Answer:

Here, The CML is used for efficient portfolios whereas the SML applies to all portfolios or securities

Considering the seperation theorem, The separation theorem states that the investment decision is sepaarte from the financing decision.

This implies that The SML can be used to analyze the relationship between risk and requried return for all assets.

Under the separation theorem investors should Hold the same portfolio of risky assets and the same expected return but at different levels of risk

Explanation:

See answer