Given the Following : Risk free rate = 5% Risk Premium = E(R) Rf Expected Return

Given the Following : 

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Risk free rate = 5% Risk Premium = E(R) — Rf Expected Return increases with increase of Risk Name of Portfolio High-rated bond X Corporate bond Y Stock Z Risk Category Low Medium High Rf (%) 6 6 6 Expected Return (%) 9 11 14 Risk (0)% 6 9 12 Risk Premium (%) 3 5 8 How can an investor will choose the portfolio to trade off return against risk? Risk free rate = 5% Risk Premium = E(R) — Rf Expected Return increases with increase of Risk Name of Portfolio High-rated bond X Corporate bond Y Stock Z Risk Category Low Medium High Rf (%) 6 6 6 Expected Return (%) 9 11 14 Risk (0)% 6 9 12 Risk Premium (%) 3 5 8 How can an investor will choose the portfolio to trade off return against risk?

Answer rating: 100% (QA)

Solution An investor can choose the portfolio to trade off return against risk by considering the ri... View the full answer