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

Question

Quizplus · Accepted Answer

To form a portfolio to the right of the optimal risky portfolio on the Capital Allocation Line, the investor must take on more risk by borrowing at the risk-free rate (option B) and/or investing only in risky securities (option C).

An Investor Who Wishes to Form a Portfolio That Lies