We have seen that CAL can have a kink when the agent uses leverage (i.e., the share of the optimal risky portfolio is bigger than one.) Which statement is correct?

A. Some agents may invest in a portfolio in the right side of the kink because it offers a higher Sharpe ratio.

B. Some agents may invest in a portfolio in the right side of the kink despite it offering a lower Sharpe ratio.

C. No agent will invest in points right of the kink because it offers a lower Sharpe ratio.

D. No agent will invest in points left of the kink because it has a lot of risk.

When we find the tangent line from the risk-free rate to the efficient frontier, we indeed are

A. Minimizing unnecessary risk.

B. All three are correct.

C. Finding the CAL with maximum Sharpe ratio

D. Finding the global minimum variance point.

Which asset class is likely not to be included when we estimate the "market portfolio return" using available data?

A. Gold

B. Private equity firms

C. Stocks of publicly traded firms

D. Long-term bonds