When Borrowing and Lending at a Risk-Free Rate Are Allowed,which

question 75

Multiple Choice

When borrowing and lending at a risk-free rate are allowed,which Capital Allocation Line (CAL) should the investor choose to combine with the efficient frontier?
I.The one with the highest reward-to-variability ratio.
II.The one that will maximize his utility.
III.The one with the steepest slope.
IV.The one with the lowest slope.

• A)I and III
• B)I and IV
• C)II and IV
• D)I only
• E)I,II,and III

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Definitions:

Conditional

A statement, often expressed as "if-then," that specifies a condition and the outcome if that condition is met.

Conjunction

In grammar, a conjunction is a part of speech that connects words, sentences, phrases, or clauses.

Disjunction

A logical function that results in true when any one or more of the inputs are true.

Biconditional

A logical connective expressing the idea that two statements are true or false simultaneously.