1. Because the capital market line is based on total risk…
A. … individual stocks will plot above the CML.
B. … individual stocks will plot on the CML.
C. … individual stocks will plot below the CML.
D. … individual stocks could plot above or below the CML.
E. … none of the above.
2. If you borrow at the risk-free rate and use the borrow money plus your own money to invest in the market…
A. … the expected return and risk of your equity investment will not change.
B. … the expected return on your equity will go down and the risk will go up.
C. … the expected return on your equity will go down but the risk will go down.
D. …. the expected return on your equity will go up and the risk will go down.
E. …. the expected return on your equity will go up but the risk will go up.