QUESTION 2

If transaction costs exist in the market and short sales risky assets are banned, from a theoretical perspective the impact of this is likely to be:

(i) Portfolios become less efficient

(ii) For a given risk, investors achieve lower retums

(ii) Investors will choose less risky portfolios

A. (i) only

B. (i) and (ii) only

C. (i) and (iii) only

D. (i), (i) and (ii)