A risk-free asset and placing it on a level

Risk-free asset

A risk-free asset is an investment with some expectation and a standard deviation of 0 (zero). That is, we will definitely receive the expectation.

Examples of risk-free assets

• From the perspective of savers : bank deposits, government bonds, etc.
• From the perspective of lenders : Lenders, for example – banks and financial institutions: a loan secured by a state guarantee.

In Figure 3, points a and b on the plane represent 2 risk-free assets.

• Point a – a bank deposit that yields a return of 3%.
• Point b – a loan that yields a 5% return to the bank.

Figure 3