12.2 Trade-Off between Expected Return and Risk Assume a world with a single risky asset and a single riskless asset The risk-free(riskless)asset is a default-free bond with the same maturity as the investor's decision (or possibly the trading)horizon(dfn.of riskless) The assumption of a risky and riskless security simplifies the analysis THE COURSE OF FINANCE 2017 SPRING SJTU 1312.2 Trade-Off between Expected Return and Risk  Assume a world with a single risky asset and a single riskless asset  The risk-free(riskless) asset is a default-free bond with the same maturity as the investor’s decision (or possibly the trading) horizon(dfn. of riskless)  The assumption of a risky and riskless security simplifies the analysis THE COURSE OF FINANCE 2017 SPRING SJTU 13