2. You’ve just decided upon your capital allocation for the next year. You believe the expected return should be 10% and the standard deviation is 28%. The risk-free rate is 5%. As the market moves, you would like to raise the expected return, lower the standard deviation of your risky portfolio, and adjust the risk-free rate to 4%. Will you increase or decrease your allocation to your risky portfolio given the same expected return?

3. When the risk-free rate increases because of inflation, investors should reduce their allocation to risky portfolio given the same expected return. Do you agree? Why?

Answer rating: 100% (QA)

Heres the breakdown of the questions and the reasoning behind the answers 1 Will you increase or decrease your allocation to the risky portfolio Decre... View the full answer