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2) The price of risk measures how risk and return can be traded off in...

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Finance

2) The price of risk measures how risk and return can be traded off in making portfolio choices. Assume that the standard deviation of a risky asset is 2.00% (and does not change) with a return of 8.00%. You also have the choice to invest in a risk-free asset with return 3.00%. a) If the risk-free return increases by 1.00 percentage points and the risky asset return increases by 7.00 percentage points, what is the change in the price of risk (in percentage points)? __ (Round to two decimals, if necessary.)

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