Explain the investor optimal portfolio

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Consider two stocks, A and B, and a risk-free asset Rf. Stock A has a higher expected return and a higher standard deviation than stock B. Investor 1's optimal portfolio consists of 50% Rf, 25% A, and 25% B. If investor 2 is more risk averse than investor 1, which of the following could be investor 2's optimal portfolio?

a. 40% Rf, 30% A, and 30% B.

b. 50% Rf, 30% A, and 20% B.

c. 50% Rf, 25% A, and 25% B.

d. 60% Rf, 20% A, and 60% B.

Reference no: EM133111770

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