Review:efficient frontier From Portfolio Choice... The CML is tangent to the efficient frontier at the tangency portfolio. The tangency portfolio is the portfolio of risky assets that maximizes the Sharpe ratio. The slope of the CML is the maximum Sharpe ratio. Rational investors always hold a combination of the tangency portfolio and the risk-free asset.The proportion depends on investors'risk preferences. 2010/Yichuan Liu 3‐ Review: efficient frontier From Portfolio Portfolio Choice… Choice…  The CML is tangent to the efficient frontier at the tangency portfolio.  The tangency portfolio is the portfolio of risky assets that maximizes the Sharpe ratio.  The slope of the CML is the maximum Sharpe ratio.  Rational investors always hold a combination of the tangency tangency portfolio portfolio and the risk‐free asset. The proportion depends on investors’ risk preferences. 2010 / Yichuan Liu 3