what is the capital market line cml 
the capital market line cml represents portfolios that optimally combine risk and return it is a theoretical concept that represents all the portfolios that optimally combine the risk free rate of return and the market portfolio of risky assets under the capital asset pricing model capm all investors will choose a position on the capital market line in equilibrium by borrowing or lending at the risk free rate since this maximizes return for a given level of risk investopedia eliana rodgersformula and calculation of the capital market line cml calculating the capital market line is done as follows rp rf rt rf t pwhere rp portfolio returnrf risk free ratert market return t standard deviation of market returns p standard deviation of portfolio returns begin aligned r p r f frac r t r f sigma t sigma p textbf where r p text portfolio return r f text risk free rate r t text market return sigma t text standard deviation of market returns sigma p text standard deviation of portfolio returns end aligned rp rf t rt rf p where rp portfolio returnrf risk free ratert market return t standard deviation of market returns p standard deviation of portfolio returns 