The graph of the capital allocation line is in the figure below. I told you in class that the line segment AB (the part of the line from point A to point B) is more realistic than the line segment BC. Why is this true? Elr) Point B Point A Point B Point A 4 There is no such thing as a risk-free rate The S&P 500 is not a perfect proxy for the portfolio of risky assets Investors are not well diversified The cost of borrowing on margin is higher than the risk-free rate The graph of the capital allocation line is in the figure below. I told you in class that the line segment AB (the part of the line from point A to point B) is more realistic than the line segment BC. Why is this true? Elr) Point B Point A Point B Point A 4 There is no such thing as a risk-free rate The S&P 500 is not a perfect proxy for the portfolio of risky assets Investors are not well diversified The cost of borrowing on margin is higher than the risk-free rate