An Investor Who Wishes to Form a Portfolio That Lies

question 74

Multiple Choice

An investor who wishes to form a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line must

• A) lend some of her money at the risk-free rate.
• B) borrow some money at the risk-free rate.
• C) invest only in risky securities.
• D) borrow some money at the risk-free rate, invest in the optimal risky portfolio, and invest only in risky securities
• E) Such a portfolio cannot be formed.

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Definitions:

Significance Level

The probability of rejecting the null hypothesis when it is true, often denoted by alpha (α).

Chance

The occurrence of events in the absence of any deliberate intention or predictable causation, often used to describe random variability in data.

Confidence Interval

A range of values derived from sample data that is likely to contain the true population parameter with a certain level of confidence.

Statistically Significant

Indicates that an observed effect or result is unlikely to have occurred by chance, suggesting a real impact or difference that is not due to random variation.