4. Investor equilibrium The following graph shows the set of portfolio opportunities for a multiasset case. The point RF 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 II and I2 are indifference curves for a particular investor. EXPECTED RATE OF RETURN (Percent) 10 RISK (Portfolio's standard deviation) The points on the line PRF MZ represent: o Portfolios that are dominated by portfolio A The best attainable combinations of risk and return Portfolios with the smallest degree of risk for a given expected return o Portfolios that are dominated by any portfolio at any point on the efficient frontier BME Which of the following best defines the point ref on the graph? o The return on the risk-free asset, RF 0 The market risk premium, ("M - PRF) 0 The return on the market portfolio, IM 0 The return on a risky portfolio Suppose that the return on the risk-free asset is rRF = 10%, the return on the market portfolio is M = 15%, the market risk is OM = 15%, and the portfolio risk is Op = 10%. Then the expected rate of return on an efficient portfolio equals -. a) 14.95% b) 13.30% c) 18.30% d) 20.00% Generally, a riskier portfolio would have rate of return. a) the same b) a higher c) a lower