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23 February, 08:29

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the Capital Allocation Line must:

A. lend some of her money at the risk-free rate and invest the remainder in the optimal risky portfolio.

B. borrow some money at the risk-free rate and invest in the optimal risky portfolio.

C. invest only in risky securities.

D. such a portfolio cannot be formed.

E. B and C

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Answers (2)
  1. 23 February, 09:51
    0
    E. B and C

    Explanation:

    An investor who has an aim of forming a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line must do so by borrowing some money at the risk-free rate and then investing this borrowed money in the optimal risky portfolio. By doing so, the investor must also be willing to invest in risky securities.
  2. 23 February, 10:12
    0
    B and C

    Borrow some money at risk free rate and invest in the optimal risky portfolio AND Invest only in risky securities.
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