4. Investor equilibrium Aa Aa E The following graph shows the set of portfolio opportunities for a multiasset case. The point le corresponds to a risk-free asset, the red curve BME is the efficient frontier, the shaded area under the efficient frontier represents the feasible set of portfolios of risky assets, and the yellow curves 11 and 12 are indifference curves for a particular investor. EXPECTED RATE OF RETURN (Percent) 10 RISK (Portfolio's standard deviation) Point B, where indifference curve I1 is tangent to the efficient set, represents: O O O The best attainable combinations of risk and return A portfolio that provides the highest possible return for a given amount of risk A portfolio that dominates portfolio A A portfolio that combines the risk-free asset with a portfolio of risky assets Which of the following best defines the point Pre on the graph? The return on a risky portfolio The market risk premium, (IM - PRF) The return on the risk-free asset, PRE The return on the market portfolio, IM Suppose that the return on the risk-free asset is PRF = 15%, the return on the market portfolio is r = 20%, the market risk is OM = 10%, and the portfolio risk is op = 15%. Then the expected rate of return on an efficient portfolio equals Generally, a less risky portfolio would have rate of return. 4. Investor equilibrium Aa Aa E The following graph shows the set of portfolio opportunities for a multiasset case. The point le corresponds to a risk-free asset, the red curve BME is the efficient frontier, the shaded area under the efficient frontier represents the feasible set of portfolios of risky assets, and the yellow curves 11 and 12 are indifference curves for a particular investor. EXPECTED RATE OF RETURN (Percent) 10 RISK (Portfolio's standard deviation) Point B, where indifference curve I1 is tangent to the efficient set, represents: O O O The best attainable combinations of risk and return A portfolio that provides the highest possible return for a given amount of risk A portfolio that dominates portfolio A A portfolio that combines the risk-free asset with a portfolio of risky assets Which of the following best defines the point Pre on the graph? The return on a risky portfolio The market risk premium, (IM - PRF) The return on the risk-free asset, PRE The return on the market portfolio, IM Suppose that the return on the risk-free asset is PRF = 15%, the return on the market portfolio is r = 20%, the market risk is OM = 10%, and the portfolio risk is op = 15%. Then the expected rate of return on an efficient portfolio equals Generally, a less risky portfolio would have rate of return