Respuesta :
Answer:
The correct answer is letter "B": borrowing rate exceeding lending rate.
Explanation:
Using a linear method of Capital Allocation implies investors assuming they will acquire risk-free assets putting their money on them evenly over a course of time. This scenario is unlikely to come true. Thus, Capital Allocation is kinked when investors' portfolio is riskier but needs higher investment increasing the borrowing rate at a point of exceeding the lending rate.
The capitals allocation line is the graph that is created by the investors that measure the risk and risk free assets. The graph shows the return and is made by taking certain levels of risk.
- The slope of the lending portfolio is more than that of the borrowing portfolio.
- Hence the option B that is the borrower rate is always more of the lending rate. The rate at which one borrows money is more higher.
Learn more about the straight to a kinked capital allocation line is a result.
brainly.com/question/14282378.
