Answer: 0.73.

## Explanation The Capital Market Line (CML) represents the risk-return trade-off for efficient portfolios in the Capital Asset Pricing Model (CAPM). The slope of the CML is calculated as: **Slope of CML = (Expected Return of Market Portfolio - Risk-Free Rate) / Standard Deviation of Market Portfolio** Given: - Expected return of market portfolio (E(Rm)) = 10% = 0.10 - Standard deviation of market portfolio (σm) = 11% = 0.11 - Risk-free rate (Rf) = 2% = 0.02 **Calculation:** Slope = (0.10 - 0.02) / 0.11 Slope = 0.08 / 0.11 Slope = 0.72727... ≈ 0.73 Therefore, the slope of the capital market line is closest to **0.73**. **Why this is correct:** - The CML slope represents the market price of risk (Sharpe ratio of the market portfolio) - It shows the additional expected return per unit of total risk (standard deviation) - A slope of 0.73 means investors receive 0.73% additional expected return for each 1% increase in portfolio standard deviation along the efficient frontier

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