Today, you observe the market portfolio has an expected return of 13 percent, with a standard deviation

Question:

Today, you observe the market has an of 13 percent, with a standard deviation of 7 percent. The risk-free rate is 2 percent. If only the risk-free rate increases, will the composition of the market change? Will the expected risk and return on the market change? Explain your reasoning.

Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...