A moderately risk-averse investor has 50 percent of her portfolio invested in stocks and 50 percent invested in risk-free Treasury bills. Show how each of the following events will affect the investor's budget line and the proportion of stocks in her portfolio: a) The standard deviation of the return on the stock market decreases, but the expected return on the stock market remains the same. b) The expected return on the stock market decreases, but the standard deviation of the stock market remains the same. c) The return on risk-free Treasury bills decreases.
