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      Question

      A portfolio to the right of the market portfolio on the

      Capital Market Line is:
      A A lending portfolio Correct Answer Incorrect Answer
      B A borrowing portfolio Correct Answer Incorrect Answer
      C An inefficient portfolio Correct Answer Incorrect Answer
      D Both a and c Correct Answer Incorrect Answer
      E None of the above Correct Answer Incorrect Answer

      Solution

      A portfolio to the right of a portfolio on the Capital Market Line has more risk than the market portfolio. Investors seeking to take on more risk will borrow at a risk-free rate to purchase more of the market portfolio. Taking a borrowing position is riskier.

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