Chapter 25 explains that is is better for investors to have some money invested in a risk-free asset and the remaining money in a stock market portfolio or stock-bond portfolio. A risk-free asset by definition will protect your initial investment (no default risk) even though it may not provide any return. Although we often use T-bill return as a risk-free return, your FDIC checking/savings accounts may be regarded as a risk-free asset up to the FDIC protection limit. Remember that the return to risk ratio from the new efficiency frontier with the risk-free asset (i.e. CML) is better than from the old efficiency frontier with no risk-free asset. Explain why the addition of a risk-free asset will lower the overall portfolio risk and raise the return to risk ratio.