How is it possible to invest only in the market portfolio yet have a portfolio Beta of 1.5?
A)don't diversify away the unique risks.
B)purchase only aggressive stocks for the portfolio.
C)purchase only stocks with high levels of systematic risk.
D)borrow funds to increase your investment.

Question

Quizplus · Accepted Answer

Borrowing funds to increase your investment in the market portfolio effectively leverages your investment, increasing the portfolio's beta beyond 1. This is because leveraging amplifies both the potential gains and losses relative to the market's movements, thereby increasing the portfolio's sensitivity (beta) to market movements.

How Is It Possible to Invest Only in the Market