How Can an Investor Earn More Than the Return Generated

question 58

Multiple Choice

How can an investor earn more than the return generated by the tangency portfolio and still stay on the security market line?

• A)Borrow at the risk-free rate and invest in the tangency portfolio.
• B)Add high risk/return assets to the portfolio.
• C)Adjust the weight of stock in the portfolio to include fewer high-return stocks.
• D)It cannot be done.

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Definitions:

Study Groups

Small groups of students who meet regularly to discuss and learn course material together.

Emotional Intelligence

The ability to understand, manage, and communicate one's feelings, while dealing wisely and compassionately with others in social interactions.

Delaying Gratification

The act of resisting an immediate reward in preference for a later reward, often seen as a sign of emotional maturity and self-control.

Panic Attacks

Sudden periods of intense fear or discomfort, often with physical symptoms like rapid heartbeat.