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.

Basic EPS is the amount of income available to common shareholders divided by the weighted average number of common shares outstanding over period.

Dilluted EPS is in the effect of three types of potentially dillutive financial instruments :

convertible preferred, convertible debt, and employee stock options.

* Dilluted EPS when a company has Convertible Preferred Stock outstanding (if-converted method)

* Dilluted EPS when a company has Convertible Debt outstanding (if-converted method)

* Dilluted EPS when a company has Stock Options, Warrants, or their Equivalents outstanding (treasury stock method under U.S. GAAP)

Dilluted EPS will always be less than or equal to basic EPS.