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:

Lost Property

Items that are unintentionally left by their owner at an unspecified location, where the owner retains the right to reclaim.

Inherited Property

Assets or estates received from someone who has passed away, typically through a will or through the laws of intestacy.

Leased

A contractual arrangement where an owner of a property allows another party to use the property for a specified time in exchange for periodic payments.

Ownership

The legal right or title to possess, use, control, and dispose of an asset, property, or resource, recognized by law.