Answer:
just as the name implies, risk-free security have zero risk attached to them.beta=0
while a market portfolio has market risk that is ,its Beta = 1. the question says explain the differences in allocations between the risk free security and market portfolio
see below for further explanation
Explanation:
Explain how differences in allocations between the risk-free security and the market portfolio can determine the level of market risk.
just as the name implies, risk-free security have zero risk attached to them.beta=0
while a market portfolio has market risk that is ,its Beta = 1. the question says explain the differences in allocations between the risk free security and market portfolio
Assuming 30% of the portfolio is invested in risk-free securities, while 70% of the portfolio is invested in the market, then the portfolio will have Beta = 70%.
risk free securities are those securities which have no risk,they don't get struck by economic turbulence eg the US treasury bill.
while market portfolio are series of investment with diffrent assets.
