$2$uestion $6(10$ points$)$

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Which of the following statement is TRUE?

A useful measure of risk for diversified portfolios is standard deviation

The slope of the Capital Allocation line $($CAL$)$ equals the increase in expected return that an investor can obtain per unit of additional standard deviation.

Holding constant the risk premium of the risky portfolio, a higher risk$-$free rate will increase the Sharpe ratio of investments with a positive allocation to the risky asset.

A lower aimocation to the risky portfolio reduces the Sharpe ratio $($or the rewardto$-$volatility ratio$).$

Both A and $B$