Question

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 and invest the remainder in the optimal risky portfolio.
B. borrow some money at the risk-free rate and invest in the optimal risky portfolio.
C. invest only in risky securities.
D. such a portfolio cannot be formed.
E.B and C

Answer 1

B and C

Borrow some money at risk free rate and invest in the optimal risky portfolio AND Invest only in risky securities.

Step-by-step explanation:

Answer 2

E. B and C

Step-by-step explanation:

An investor who has an aim of forming a portfolio that lies to the right of the optimal risky portfolio on the capital allocation line must do so by borrowing some money at the risk-free rate and then investing this borrowed money in the optimal risky portfolio. By doing so, the investor must also be willing to invest in risky securities.