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Question:

An investment advisor constructs a portfolio that plots on the capital market line but has less risk and a lower return than the market portfolio. This portfolio is most accurately described as a(n):

A lending portfolio.
Explaination

A portfolio that plots on the capital market line with less risk than the market portfolio must include a positive allocation to the risk-free asset. Such a portfolio is called a lending portfolio because investing in the risk-free asset represents lending at the risk free rate.