Investments, tenth edition

  Capital Allocation and the Separation Property

  Now that we have the efficient frontier, we proceed to step two and introduce the risk-

free asset.  Figure 7.13  shows the efficient frontier plus three CALs representing various- 

portfolios from the efficient set. As before, we ratchet up the CAL by selecting different 

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6/18/13   8:11 PM

6/18/13   8:11 PM

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