The optimal risky portfolio is the market portfolio. The capital market
theory assumes that investors have homogeneous expectations and are
rational. As a result, same inputs are used for valuation purposes and
hence the expected return and expected variance do not differ
Portfolio Management MCQ - Portfolio Management Section 1
A borrowing portfolio is towards the right of the point M on the capital
market line, as increasing amounts of borrowed money is being invested.
The further towards the right, the greater the returns.
Risk that is due to company-specific or industry-specific factors is referred
to as unsystematic risk.
Firm-specific risk is known as unsystematic risk and can be diversified
unlike the systematic or market risk.
Nonsystematic risks are firm specific risks; natural disasters and political
uncertainty are factors that affect the entire market and are thus
systematic risks.
