Capital Allocation Line with Two Assets : formula, calculation, graph

 

The two-asset portfolio is drawn as follows. (Risk-free Asset & Risky Asset)

 

The line is called the capital allocation line.

 

[ Capital Allocation Line calculation formula ] - portfolio allocation with two assets ; risky & risk-free

 

The capital allocation line has an intercept of , and a slope of  .

 

 

[ Capital Allocation Line with Two Assets : Linear Graph ] (CAL)

 

 : Return of risk-free asset

 

: Expected return of investment to risky asset.