The CAPM model is based on specific assumptions. The investor could borrow or lend any amount of money at risk less rate of interest.
All investors hold only market Portfolio and the restless securities. Market portfolio consists of the investments in all securities of the market the proportion invested in IT security is equal to the percentage of the total market capitalisation represented by the security.
The capital market line represents the relationship between the expected return and standard deviation of the portfolio. The risk of the security is indicated by its covariance with the market portfolio.
