Answer: Yes and $S_2 = S_1$.

## Explanation When an investor leverages their portfolio by borrowing at the risk-free rate to invest more in the market portfolio, they remain on the efficient frontier. This is because the market portfolio lies on the efficient frontier, and leveraging (borrowing to invest more) simply moves the investor along the Capital Market Line (CML), which represents efficient portfolios. **Key points:** - The market portfolio (M) is on the efficient frontier - Leveraging by borrowing at the risk-free rate moves the investor along the CML - The Sharpe ratio remains unchanged when leveraging/deleveraging along the CML - Therefore, $S_2 = S_1$ and the investor remains efficient The Sharpe ratio is preserved because both the excess return and standard deviation scale proportionally when leveraging.

Author: LeetQuiz Editorial Team