If the risk-free rate is 1.5% and the risk premium is 2%, the MP curve is at:
A)1.5%.
B)3.5%.
C)2%.
D)4%.

Question

Quizplus · Accepted Answer

The MP curve represents the relationship between the market risk premium and the expected return on the market portfolio. In this case, the risk-free rate is 1.5% and the risk premium is 2%, so the expected return on the market portfolio is 1.5% + 2% = 3.5%. Therefore, the MP curve is at 3.5%.

If the Risk-Free Rate Is 1