This section extends the concept of diversification to portfolios with multiple assets. We get to know the limits of diversification, which is represented by the Efficient Frontier. Then we look at the question of optimal portfolio choice if we can invest in risky as well as risk-free assets. The result is the so-called Capital Market Line, which depicts the best possible portfolios from the point of view of risk and return. These portfolios offer the maximum possible return for any given level of risk.
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