Finance School of Management The Trade-off between Expected Return and risk The objective is to find the portfolio which offers investors the highest expected rate of return for the degree of risk they are willing to tolerate。 Iwo step process find the optimal combination of risky assets. mix this optimal risk -asset with the riskless asset uesTc 1010 Finance School of Management The Trade-off between Expected Return and Risk ❖ The objective is to find the portfolio which offers investors the highest expected rate of return for the degree of risk they are willing to tolerate. ❖ Two step process: – find the optimal combination of risky assets. – mix this optimal risk-asset with the riskless asset