An investor with a portfolio located on the capital market line to the left of the market portfolio has: A. a lending portfolio. B. a borrowing portfolio. C. lower unsystematic risk than the market portfolio. D. higher unsystematic risk than the market portfolio.
A, lending at the risk free rate.
Yup Bang on target
can someone explain the CML to me? If the point is lying anywhere between RFR and porf M, i thot he has some in RFR and some in porf M…
The investor would have exposure to the RFR b/c they have to lend money at that rate to earn the interest. That interest + the return on their allocation to port M makes up the investors total return.