By Combining Lending and Borrowing at the Risk-Free Rate with Efficient

question 70

Multiple Choice

By combining lending and borrowing at the risk-free rate with efficient portfolios, we can

• A)extend the range of investment possibilities.
• B)extend the range of investment possibilities and change the set of efficient portfolios from being curvilinear to a straight line.
• C)extend the range of investment possibilities, change the set of efficient portfolios from being curvilinear to a straight line, and provide a higher expected return for any level of risk, except for the tangential portfolio and the risk-free asset.
• D)change the set of efficient portfolios from being curvilinear to a straight line and provide a higher expected return for any level of risk, except for the tangential portfolio and the risk-free asset.

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Definitions:

Neoclassical Economics

A framework within economics that predominantly focuses on the determination of goods, outputs, and income distributions in markets through supply and demand as mediated by prices.

Behavioral Economics

A field of economics that studies how psychological, cognitive, emotional, cultural, and social factors affect economic decisions.

Natural Disasters

Catastrophic events caused by natural processes of the Earth, such as earthquakes, hurricanes, and floods, affecting societies and economies.

Behavioral Economists

Economists who study the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions.