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:

Less

A comparative term indicating a smaller amount, degree, or extent of something.

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A transient light-headedness or sensation of near loss of consciousness.