Risk-averse investor who proxies risk by standard deviation

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Reference no: EM131355328

If Security X has an expected return of 2% and a risk of 10%, Security Y has an expected return of 5% and a risk of 25%, and the risk of an equally weighted portfolio of the two is 15%, then which of the following statements is correct for a risk-averse investor who proxies risk by standard deviation?

a. It is impossible to determine the preference order

b. The investor prefers Security A as a first choice and Security B as a second choice

c. The investor is indifferent between the three options

d. The investor Security B as a first choice and Security A as a second choice

e. The investor prefers the portfolio and is indifferent between the two securities

f. The investor is indifferent between the two securities but would prefer any of them to the portfolio

Reference no: EM131355328

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