Question: Youve just decided upon your capital allocation for the next year, when you realize that youve overestimated both the expected return and the standard deviation

Youve just decided upon your capital allocation for the next year, when you realize that

youve overestimated both the expected return and the standard deviation of your risky

portfolio by 2%. Will you increase, decrease, or leave unchanged your allocation to risk-free

T-bills? (Hint: Return (%) is usually lower the standard deviation (%)).

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