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Business, 23.03.2020 17:25 datgamer13

A highly risk-averse investor is considering the addition of an asset to a 10-stock portfolio. The two securities under consideration both have an expected return equal to 15 percent. However, the distribution of possible returns associated with Asset A has a standard deviation of 12 percent, while Asset B's standard deviation is 8 percent. Both assets are correlated with the market with p = 0.75.

Which asset should the risk-averse investor add to his/her portfolio?

a. Asset A
b. Asset B.
c. Both A and B.
d. Neither A nor B.
e. Cannot tell without more information.

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Answers: 3

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