Two assets have the following expected returns and standard deviations when the risk-free rate is 5%:
Asset A: Expected return = 10% & SD = 20%
Asset B: Expected return = 15% & SD = 27%
An investor with a risk aversion of A = 3 would find that on a risk return basis.
a. only Asset A is acceptable
b. only Asset B is acceptable
c. neither Asset A nor Asset B is acceptable
d. both Asset A and Asset B are acceptable
Answers: 2
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