If rf is the risk-free return and rm is the return on a risky asset, then...
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If rf is the risk-free return and rm is the return on a risky asset, then O rpprm Ory=rm O ryerm Orf could be less or greater than rm Q2 1 Point Risk of the portfolio increases as O return on a risky asset increases O the fraction of the investment in the risk-free asset increases the fraction of the investment in the risky asset increases O the risk of a risk-free asset increases If rf is the risk-free return and rm is the return on a risky asset, then O rpprm Ory=rm O ryerm Orf could be less or greater than rm Q2 1 Point Risk of the portfolio increases as O return on a risky asset increases O the fraction of the investment in the risk-free asset increases the fraction of the investment in the risky asset increases O the risk of a risk-free asset increases
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