Shah said that if we combine our portfolio with an investment with the risk free asset the result will be (1) a new linear efficient frontier (2) that is referred to the CAL or CML.
With the answer it appears both of this affirmation, regarding the new efficient frontier and the CAL/CML, are wrong.
I understand why the affirmation regarding CAL/CML is wrong, but I don’t undrstand why the affirmation regarding the new efficient frontier is wrong.
If the investment opportunity set is expand to include the risk free asset, isn’t this result in a new efficient frontier ?!?