Let an investor be considering two risky portfolios: A and B to construct a complete portfolio C with a risk-free asset. The reward-to-variability ratio of portfolio A is 0.12 and reward to variability ratio of portfolio B is 0.14.

A. Higher reward-to-variability ratio of portfolio B implies that its capital allocation line has a lower slope than that for the capital allocation line for A.

(TRUE/FALSE)

B. CAL(A) will plot above CAL(B)

(TRUE/FALSE)

C. Combination of portfolio A and risk-free asset will provide higher expected return for any level of risk than combination of portfolio B and risk-free asset. (2 points) (TRUE/FALSE)