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 invest more in the market portfolio increases the portfolio's exposure to market risk, effectively increasing the portfolio beta above 1.

How Is It Possible to Invest Only in the Market