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Learning objectives:
Risky Asset
An asset that carries a significant degree of risk of losing value, but also offers a potential for higher returns compared to safer investments.
Risk-Free Asset
An asset which is assumed to provide a guaranteed return with negligible risk of financial loss, often considered to be short-term government securities.
Capital Allocation Line
A graph that shows the risk-return trade-off of investable assets, indicating the most efficient portfolio possible given a certain level of risk.
Standard Deviation
Standard deviation quantifies the variation or spread of a set of numbers from its mean, highlighting the volatility or risk associated with a financial instrument or investment.
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