In capital market line, risk of efficient portfolio is measured by its____________?
Correct answer: A. Standard deviation
- A. Standard deviation
- B. Variance
- C. Aggregate risk
- D. Ineffective risk
Explanation
The capital market line measures total risk using standard deviation, which includes both systematic and unsystematic risk. Beta measures systematic risk and belongs to the security market line rather than the CML.
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Business finance explains how organisations plan, obtain and use money while balancing risk, return and liquidity. Topics include financial statements, time value of money, budgeting, working capital, capital structure, sources of finance, investment appraisal and cost of capital. Capital budgeting evaluates long-term projects, whereas working capital manages day-to-day operations.
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