Investments B and C Both Have the Same Standard Deviation

question 32

Multiple Choice

Investments B and C both have the same standard deviation of 20 percent and have the same correlation to the market portfolio. If the expected return on B is 15 percent and that of C is 18 percent, then the investors would

• A)prefer B to C.
• B)prefer C to B.
• C)reject both B and C.
• D)The answer cannot be determined without knowing investors' risk preferences.

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