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Unrestricted borrowing or lending at the risk-free rate of interest:
This assumption provides a minimum level of return required by investors. In reality, this is not possible because the risk associated with individual investors is much higher than that associated with the Government. This inability to borrow at the risk-free rate means the slope of the SML is shallower in practice than in theory.Hello tutor!!
This is an assumption regarding CAPM which I’m not able to understand. Kindly could you please explain this to me breifly and in easy way ?
Thank you!!You are not examined on the security market line.
All that is relevant is that it is assumed that they can borrow at the risk free rate of interest. In practice this is not possible and all borrowing will be at a rate higher than the risk free rate.
Have you watched all my free lectures on CAPM?
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