1. Suppose that the return on the risk-free asset is = 5%, the return on the market portfolio is = 10%, the market risk is = 10%, and the portfolio risk is = 5%. Then the expected rate of return on an efficient portfolio equals:

a) 10.00%

b) 7.50%

c) 12.50%

2. Generally, a riskier portfolio would have.....rate of return.

a) the higher

b) the same

c) the lower