giorgio10

SML: Equation is the CAPM equation.
Ri=rf + Betai*(Rm-Rf)

Intercept=rf
rm-rf = Slope
Betai = X point of Intersection.

CML: Equation:
ri = rf + [(rm-rf)/sm] * si

Intercept = rf (same as SML)
Slope = (rm-rf)/sm
sp = X Point of intersection.

If Both SML and CML are equal:
betai = si/sm

betai = cov(i,m)/sm^2

cov(i,m) = corr*si*sm

so corr*si*sm/sm^2 = si/sm
or corr*si/sm = si/sm

so implies corr=1

additionally - the equilibrium portion is true - because both CML and SML depends on investors having homogenous expectations etc.

CP