Point B$,$ where indifference curve I$1$

$1$

is tangent to the efficient set, represents:

A portfolio that provides the smallest degree of risk for a given expected return.

A portfolio that combines the risk$-$free asset with a portfolio of risky assets.

A portfolio that dominates portfolio A$.$

The best attainable combination of risk and return.

Which of the following is the correct expression for the Capital Market Line?

r$$p

r$$

p

$=[($r$$M

r$$

M

$$ rRF

r

RF

$)/\backslash$sigma M

$\backslash$sigma

M

$]$ x $\backslash$sigma p

$\backslash$sigma

p

$.$

r$$p

r$$

p

$=$ rRF

r

RF

$+[($r$$M

r$$

M

$$ rRF

r

RF

$)/\backslash$sigma M

$\backslash$sigma

M

$].$

r$$M

r$$

M

$=$ rRF

r

RF

$+[($r$$p

r$$

p

$$ rRF

r

RF

$)/\backslash$sigma M

$\backslash$sigma

M

$]$ x $\backslash$sigma p

$\backslash$sigma

p

$.$

r$$p

r$$

p

$=$ rRF

r

RF

$+[($r$$M

r$$

M

$$ rRF

r

RF

$)/\backslash$sigma M

$\backslash$sigma

M

$]$ x $\backslash$sigma p

$\backslash$sigma

p

$.$

Suppose that the return on the risk$-$free asset is rRF

r

RF

$=10\%,$ the return on the market portfolio is r$$M

r$$

M

$=15\%,$ the market risk is $\backslash$sigma M

$\backslash$sigma

M

$=15\%,$ and the portfolio risk is $\backslash$sigma p

$\backslash$sigma

p

$=10\%.$ Then the expected rate of return on an efficient portfolio equals $.$

Generally, a riskier portfolio would have rate of return.

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