Investments A and B both offer an expected rate of return of 12. The standard deviation of A is 30 percent and that of B is 20 percent. If an investor wishes to invest in either A or B, then the investor should
A)prefer A to B.
B)prefer B to A.
C)prefer a portfolio including both A and B.
D)The answer cannot be determined without knowing investors' risk preferences.

Question

Quizplus · Accepted Answer

Investment B is preferable because it offers the same expected return as A but with a lower standard deviation, indicating lower risk.

Investments a and B Both Offer an Expected Rate of Return