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?
A, lending at the risk free rate.
A
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.