11

9

The change from a straight to a kinked capital allocation line is a result of: Multiple Choice None of the above borrowing rate exceeding risk-free rate reward-to-variability ratio increasing. increase in the portfolio proportion of the risk-free asset. Consider the following two investment alternatives. First, a risky portfolio that pays 15% rate of return with a probability of 60% or 5% with a probability of 40%. Second, a treasury bill that pays 6%. The risk premium on the risky investment is Multiple Choice 9% ( 1% 5% 11%