Question: Consider the risk-return relationship for a portfolio that combines a risk-free asset and

a risky asset, assuming that \({{r}_{f}}=0.05\), \(E\left( {{R}_{A}} \right)=0.15\), and \({{\sigma }_{A}}=0.2\).

A. What is the reward per unit risk?

B. What is the equation for the portfolio’s risk-return relationship? Please graph it.

C. If an investor puts 25 percent of her portfolio wealth into the risk-free asset and

75 percent into the risky asset, what will be her portfolio’s expected return and

risk? Please show on your graph.