Elans Question regarding CAL

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Their answer is C. But I thought B because it needs to specify that lending and borrowing at risk free rate is possible?

The statement implicitly states that borrowing at the risk-free rate is possible. Statement 1 is really just defining what a CAL is, which assumes borrowing at the Rf asset is possible.

I am not sure if its true… CAL doesn’t always have to be a straight line.

If borrowing at risk free rate is not possible, CAL becomes kinked at that point.