The capital asset pricing model recommends investing in portfolios made up of a portfolio allocation to the market portfolio and a portfolio allocation to the riskless asset. Why is this the case?

Select one:

a. Including the riskless asset reduces portfolio risk.

b. None of the above.

c. The recommended portfolio offers equal or greater expected returns for a given risk level than any other portfolio with the same risk level.

d. Holding some money in the riskless asset for emergencies is prudent.

e. It is the case because the recommended portfolio is diversified.