If equal risk is added moving along the envelope curve containing the best possible combinations the return will
A) decrease at an increasing rate.
B) decrease at a decreasing rate.
C) increase at an increasing rate.
D) increase at a decreasing rate.
E) remain constant.

Question

Quizplus · Accepted Answer

Moving along the envelope curve that contains the best possible combinations of risk and return, as more risk is added, the return typically increases but at a decreasing rate. This reflects the principle of diminishing marginal returns in the context of risk and return trade-off.

If Equal Risk Is Added Moving Along the Envelope Curve