The slope of the budget line that expresses the tradeoff between risk and return for an asset can be represented by:

Question

Quizplus · Accepted Answer

The slope of the budget line is represented by the change in the return of the asset (R_m - R_f) divided by the standard deviation of those returns (σ_m), as the risk-return tradeoff is measured by the standard deviation of returns. Option B is the only one that represents this formula correctly.

The Slope of the Budget Line That Expresses the Tradeoff