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What would be the risk of the combination of the two assets

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Assignment

As you know, the risk of two assets is calculated by getting the square root of the equation:

σ^2_p=w_1^2 σ_1^2+w_2^2 σ_2^2+2w_1 w_2 P_1,2 σ_1 σ_2

Explain what would happen if one of the two assets was a risk-free asset. In other words, what would be the risk of the combination of the two assets? You have to explain that in accordance with the above equation.

Reference no: EM131568195

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