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You have just decided upon your capital allocation for the rest of the year, say investing...

You have just decided upon your capital allocation for the rest of the year, say investing 25% in the risk free money market (T-bills) and 75% in the risky capital market, when you realize that you were too optimistic about the risky capital market assetís return: while your estimate of its risk (standard deviation) was sound, you over-estimated its expected return. Will you adjust your capital allocation decision by increasing, decreasing, or leaving unchanged your allocation to the risk-free T-bills? Please draw the Capital Allocation Line (CAL) to answer this question.

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jeff jeffy answered 1 year ago
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