Chartered Financial Analyst Level 1
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The risk-return trade-off of a portfolio consisting solely of risky assets is most likely enhanced by the inclusion of a risk-free asset due to:
A
The risk-free asset exhibits no correlation with the other assets in the portfolio.
B
The lower return of the risk-free asset contributes to a diversification benefit.
C
The correlations between the risky assets diminish, thereby enhancing diversification.