The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in the
A)capital market line that shows that investors will only invest in the riskless asset.
B)capital market line that shows that investors will invest in a combination of the riskless asset and the tangency portfolio.
C)security market line that shows that all investors will invest in the riskless asset only.
D)security market line that shows that all investors will invest in a combination of the riskless asset and the tangency portfolio.
E)capital market line that shows that investors will invest at the vertical intercept point of that line.

Question

Quizplus · Accepted Answer

The combination of the efficient set of portfolios with a riskless lending and borrowing rate results in the capital market line, which shows that investors will invest in a combination of the riskless asset and the tangency portfolio. The point of tangency between the capital market line and the efficient frontier represents the optimal portfolio for investors who want to balance risk and return.

The Combination of the Efficient Set of Portfolios with a Riskless