CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which of the following statements is least accurate? An investor may construct a portfolio located on the capital market line (CML) by ______
A. investing a portion of his capital in the risk-free asset and the balance in a fully diversified portfolio of all equities.
B. investing a portion of his capital in the risk-free asset and the balance in a fully diversified portfolio of all risky assets.
C. borrowing capital at the risk-free rate and investing all his capital plus all borrowed capital in a fully diversified portfolio of all risky assets.
Explanation: Portfolios located on the CML may be constructed by: 1) investing a portion of an investor's capital in the risk-free asset and the balance in the market portfolio (which consists of all risky assets) or 2) borrowing capital at the risk-free rate and investing all of an investor's capital plus all borrowed capital in the market portfolio.

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