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The line defined by every combination of the risk-free asset and the market portfolio. The line represents the risk premium you earn for taking on extra risk. Defined by the capital asset pricing model.

Copyright © 2005, Campbell R. Harvey. All Worldwide Rights Reserved. Do not reproduce without explicit permission.

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Capital market line (CML)

capital market line

CML

risk-free asset

risk-free

market portfolio

risk premium

extra risk

capital asset pricing model